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Gary Gensler Under Pressure as HFSC Chair Patrick McHenry Says He Misled Congress Over Ethereum

Last Updated May 1, 2024 10:50 AM
Teuta Franjkovic
Last Updated May 1, 2024 10:50 AM
By Teuta Franjkovic
Verified by Peter Henn

Key Takeaways

  • Patrick McHenry has accused Gary Gensler of misleading Congress about Ethereum’s classification as a security.
  • Consensys has filed a lawsuit against the SEC, which is linked to ongoing investigations into Ethereum’s nature.
  • McHenry emphasized the need for a bipartisan understanding of Bitcoin’s foundational principles.

US House Financial Services Committee chairman Patrick McHenry has criticized  United States Securities and Exchange Commission (SEC) Chair Gary Gensler.

The American lawmaker said the under-fire regulator had misled Congress about whether or not he considered Ethereum to be a security.

McHenry Accuses Gensler of Mocking Congress on ETH Security Status

Specifically, he alleged the SEC had already decided ETH was a security before Gensler attended the hearing, but he declined to confirm this when questioned.

McHenry noted  Gensler declined to respond to inquiries about the SEC’s classification of ETH. He also suggested that recent court filings indicate this was a deliberate attempt to mislead about the commission’s stance.

The status of Ethereum (ETH), the second-largest cryptocurrency by market capitalization, remains a significant unresolved issue in U.S. digital asset regulation, contested across various legal arenas. If ETH is classified as a security requiring registration and regulation by the SEC, this could set a precedent, potentially leading to the classification of many other tokens as securities as well.

Consensys Sues SEC Amid Ongoing Ethereum Investigation

Documents from a recent lawsuit filed by Consensys against the SEC reveal the agency was investigating the nature of Ethereum (ETH) just days before Gensler’s testimony in April 2023. Consensys started its legal action in anticipation of an enforcement action by the SEC. Meanwhile, McHenry argues that the agency’s ongoing investigation implies an established policy position. However, spokespeople for the SEC have not immediately responded to inquiries about McHenry’s accusations.

According to the SEC’s investigations manual, an investigation is merely a step to determine if there has been a violation of federal securities laws. That means it does not, in itself constitute a conclusion. Therefore, the SEC may not have formally decided how ETH should be categorized.

McHenry Urges Bipartisan Understanding of Bitcoin

Recently, at the Bitcoin Policy Summit held at the National Press Club in Washington, discussions among lawmakers focused on the future of Bitcoin (BTC) and cryptocurrency legislation. McHenry stressed the importance for both Democrats and Republicans to understand Bitcoin’s fundamental principles.

McHenry emphasized the need for lawmakers to take the time to understand these principles. He also said a knowledge of them would enlighten their perspectives. He suggested reading the whitepaper would lead to more informed discussions and prevent the spread of misinformation.

According to McHenry, a lack of basic knowledge about Bitcoin and blockchain technology is a primary issue. This is because it often leads people to embrace and spread inaccuracies. Meanwhile, Senators Kirsten Gillibrand and Cynthia Lummis are on the verge of introducing new legislation focused on stablecoins.

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