tillemann2_Tom WilliamsCQ-Roll Call, Inc via Getty Images_gensler Tom Williams/CQ-Roll Call, Inc via Getty Images

America’s Failing Approach to Digital Assets

In his recent appearance before the House Financial Services Committee, the chair of the US Securities and Exchange Commission could not answer basic questions about America’s approach to regulating cryptocurrencies. Unless that changes, the US will soon lose its lead in digital assets to China and other countries.

WASHINGTON, DC/SAN FRANCISCO – For the first time in 18 months, Gary Gensler, the chair of the US Securities and Exchange Commission, appeared before the House Financial Services Committee on April 18. At a time when the United Kingdom, the European Union, Japan, and other advanced economies are developing new frameworks for regulating digital assets, Gensler has taken a different approach. This was his first real opportunity to explain himself to Congress, and it did not go well.

There is an old saying among lawyers: When the law is on your side, you argue the law; when the facts are on your side, you argue the facts; and when neither is, you pound the table. Gensler’s congressional testimony featured a lot of metaphorical table pounding. The SEC chair could not even answer basic questions about the agency’s enforcement strategy, reflecting the ongoing regulatory uncertainty that has contributed to a rapid outflow of technical talent from the United States.

During the hearing, Gensler encountered pushback on everything from short public comment periods to the recent wave of senior staff departures. But the issue that prompted the most heated exchanges was Gensler’s approach to digital assets. In the aftermath of FTX’s collapse, Gensler has positioned the SEC as the lead cop on the crypto beat. Despite ongoing jurisdictional disputes with other regulators, under Gensler the SEC has pursued over 50 enforcement actions related to digital assets. But, when faced with bipartisan criticism of his dragnet approach, Gensler could not provide clear explanations for his actions.

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