Early this morning, a letter signed by several members of the U.S. Congress accusing the Securities and Exchange Commission (SEC) of stifling innovation in the crypto sector was shared by U.S. politician Tom Emmer on Twitter.
The SEC is the U.S. federal agency in charge of regulating and overseeing the financial markets in the United States. It therefore acts as the regulatory authority in the United States. For several months, SEC regulators have been multiplying investigations and actions against companies operating in the crypto sector and more generally in the Blockchain. Many companies are targeted daily by its controls, we can for example cite the case of the procedure initiated against the company Ripple in 2021 about a bad legal qualification of its token XRP.
The bipartisan letter was signed by eight active members of the US Congress. They wanted to highlight their concern about the SEC’s repeated scrutiny of crypto companies.
The letter is directly addressed to Gary Gensler, who was appointed SEC chairman by US President Joe Biden on February 3, 2021.
What are the criticisms of members of Congress?
In sharing the letter, Tom Emmer offered a series of criticisms of the SEC’s action, led by Gary Gensler.
“My office has received numerous reports from crypto and blockchain companies that SEC Chairman @GaryGensler’s “requests” for information reporting from the crypto community are too burdensome, don’t feel particularly… voluntary… and stifle innovation.”
In particular, the SEC is criticized for the multiplication of examinations/investigations of companies that have an activity in the field of cryptos and Blockchain. Cumbersome and repetitive examinations, which, according to the political co-signatories of the letter, logically leads to reduce innovation in this sector. Yet, fostering innovation in crypto companies was (in theory) one of the goals of regulatory authorities in the United States, including the SEC.
In addition, the eight members of Congress accuse the SEC of “drowning companies in paperwork.” Worse still, more serious accusations were raised by the signatories. Indeed, they believe that the SEC is abusing its investigative powers by overstepping its jurisdiction and thus “overcharging” crypto companies.
“There appears to have been a recent trend of employing the Enforcement Division’s investigative functions to gather information from unregulated participants in the crypto-currency and blockchain industry in a manner inconsistent with the Commission’s standards for opening investigations.”
This would violate a 1980 Paperwork Reduction Act (PRA) in the United States. This law regulates the amount of paperwork that an individual or corporation must provide to a federal agency.
And the others?
Moreover, American politicians are not the only ones to raise their voices against the SEC’s action. While many companies are content to comply with the SEC’s requests, Ripple CEO Brad Garlinghouse was keen to voice his criticism.
He explains that many crypto companies are trying to comply with SEC guidelines to avoid trouble.
“There is no doubt that the SEC has reduced the competitiveness of this critical industry (crypto) in the US. I think they have acted outside of their scope. The only country in the world that considers XRP security is the United States, we work successfully in the UK, Switzerland, Japan, UAE, Singapore, all of these countries have recognized XRP as a currency. So if you want the U.S. to be a leader in this innovative industry, we need that regulatory clarity.”
Brad Garlinghouse
It should be noted that unlike many crypto companies, the CEO of Ripple made the choice to enter into a fight with the SEC after the procedure initiated in 2021 which aimed to qualify the token XRP as a “security” while other countries including the United Kingdom, the United Arab Emirates (UAE), Switzerland qualify cryptos as currency.
However, he welcomes Joe Biden’s executive order on the regulation of cryptos, passed last week.
