Regulation

Senator Cynthia Lummis Critiques US SEC’s Crypto Regulation Approach

Published

3 hours ago

September 28, 2024

Wyoming Senator, Cynthia Lummis, an advocate for digital assets, has criticized the US Securities and Exchange Commission’s (SEC) handling of cryptocurrency regulations. Speaking on CNBC’s Squawk Box, Lummis criticized SEC Chair Gary Gensler for his attitude towards the cryptocurrency market saying it was counterproductive and problematic.

Senator Cynthia Lummis Critiques US SEC’s Crypto Regulation

During the interview, the Senator stressed that the US crypto industry has many problems, which are only accentuated by the current tactics of the SEC. Lummis took aim at SEC Chairman Gary Gensler for his approach to regulating the sector, which she said involved using enforcement actions instead of clear guidelines.

She pointed out that this has resulted in a lot of uncertainty, with many digital asset companies ending up mired in legal disputes instead of being offered clear rules to follow.

According to Senator Cynthia Lummis, the SEC has been a significant hindrance to the further development of the cryptocurrency sector despite the need for regulatory certainty. She pointed out that the current legal framework is insufficient and incapable of catching up with the advancement, especially considering the EU which adopted a complete set of crypto laws in 2023. Lummis noted that the United States might lose its position in the global financial services market if such shortcomings in regulation are not filled as soon as possible.

“Crypto Assets Should Fall Under CFTC Oversight”

Lummis also touched on the category of digital assets and shared her view that Bitcoin and Ethereum are commodities and should fall under CFTC jurisdiction instead of the SEC.

She noted that the SEC strategy, which has tended to categorize digital assets as securities, does not apply to decentralized cryptocurrencies such as Bitcoin and Ethereum.

Senator Cynthia Lummis also stressed that Congress should step up and come up with proper legislation that would state the scope of different agencies concerning digital assets. She noted that despite the fact that there are still some assets that can be regulated by the CFTC, there is a need to have a clear and current framework for the regulation of the market. She also pointed out that the Howey Test, which is a legal test applied to ascertain whether an asset can be considered a security, may require an update in view of the current developments in the crypto market.

Gary Gensler’s Stance on BTC and ETH

In contrast with Senator Cynthia Lummis, SEC Chair Gary Gensler has maintained that the U.S. already has crypto regulations in place. During an interview, Gensler responded to criticism from industry stakeholders, arguing that “not liking the rules is not the same as there being no rules.”

He insisted that the SEC is focused on protecting investors, noting that many crypto firms have benefited from public interest in digital assets without providing proper disclosures.

Gensler affirmed that Bitcoin is not a security, a stance shared by his predecessor Jay Clayton. This distinction, Gensler noted, allowed the SEC to approve the launch of Bitcoin Spot Exchange-Traded Funds (ETFs) earlier this year. However, Gensler has remained largely silent on the classification of Ethereum, though its treatment as a commodity has been inferred from regulatory decisions regarding Ethereum ETFs.

Lummis Calls for Changes in Crypto Regulation

According to the Wyoming Senator, these gaps can only be closed by legislation. She cited her plan with Senator Kirsten Gillibrand to change the wash sale rule in order to increase the funding for the CFTC and its capacity to regulate the digital asset space.

This proposal, she said, would allow for a more comprehensive approach to regulating the crypto space without jeopardizing its potential.

In addition, Senator Cynthia Lummis and a number of other lawmakers have also expressed concern about the SEC’s Staff Accounting Bulletin 121 (SAB 121) that forces crypto custodians to include customer assets as liabilities. In a letter to Gensler, lawmakers demanded that SAB 121 be withdrawn stating that it places undue regulatory restraints on the crypto industry.