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Four U.S. Congressmen Urge SEC Chair Gensler to Approve Spot Bitcoin ETFs “Immediately”

Published September 27, 2023 11:47 AM
Teuta Franjkovic
Published September 27, 2023 11:47 AM

Key Takeaways

  • Four members of the HFSC have asked the SEC to move forward with ETF approvals.
  • After losing a legal battle over its decision to deny Grayscale’s spot bitcoin ETF application, the industry is waiting for the SEC to act.
  • Gensler’s approach to regulating cryptocurrency is sure to draw criticism.

A group of prominent U.S. Congressmen has written  to Securities and Exchange Commission (SEC) Chair Gary Gensler, requesting the immediate approval of spot Bitcoin Exchange-Traded Funds (ETFs).

Representatives Tom Emmer, Mike Flood, Ritchie Torres, and Wiley Nickel signed the bipartisan letter , which emphasises the importance of expanding access to Bitcoin investment alternatives and the potential benefits for American investors.

Call For Immediate Action

“We write to ensure the Securities and Exchange Commission (SEC) does not continue to discriminate against spot Bitcoin exchange traded products (ETPs),” the letter states . “The SEC is responsible for making certain that products that comply with investor protections are made available to investors.”

According to lawmakers, spot Bitcoin ETFs offer a regulated and secure way for investors to access the world’s largest cryptocurrency, making it easier to buy and sell Bitcoin on traditional stock markets and potentially attracting a broader audience.

The letter highlights the need for regulatory clarity, citing that the absence of spot Bitcoin ETFs has pushed investors toward unregulated and riskier options. Approving spot Bitcoin ETFs would establish a clear regulatory framework, enhancing investor protection and transparency.

The letter asserts Congress’s responsibility in ensuring SEC approval of investment products meeting Congress’s established requirements.

The SEC appears to have responded to Congress’s call by delaying Cathie Wood’s ARK Invest application until November 11, despite the fact that a decision was not required until November 11.

Urging Crypto Compliance In Anticipation of Wednesday Hearing

Before a congressional hearing on Wednesday, Securities and Exchange Commission Chair Gary Gensler said that most cryptocurrencies and crypto companies are subject to federal securities laws.

According to prepared testimony , Gensler, who is scheduled to speak before the House Financial Services Committee, said that securities regulations have “been on the books for decades.”

Gensler offered  a comprehensive summary of his views on cryptocurrency regulation in his prepared testimony:

Cryptocurrency and Securities Laws Within the U.S.

Gensler firmly asserted that cryptocurrencies should adhere to US securities regulations. He pointed out that when Congress enacted these rules in the 1930s, they could have been limited to traditional assets like stocks and bonds.

However, Congress adopted a broader perspective, including various financial products under the term ‘investment contract.’ Gensler believes that most crypto tokens fall into this category, subjecting them to US securities regulations.

Regulatory and Compliance Requirements

According to Gensler, if most crypto tokens are subject to securities laws, then crypto intermediates must likewise follow similar rules. He referenced Sections 5 and 15(a) of the Securities Exchange Act of 1934, which require securities exchanges, brokers, and dealers to register or meet exemption conditions.

Noncompliance in the Industry and Enforcement Actions

Gensler expressed concern about widespread noncompliance in the crypto industry, comparing it to the financial scene prior to the enactment of federal securities regulations in the 1930s. He highlighted that the SEC has launched a number of enforcement proceedings in order to hold violators accountable and safeguard investors.

Proposals for Regulation and Rulemaking

Gensler also stressed the SEC’s active role in making rules for the cryptocurrency industry. He mentioned a recent statement that clarified how current rules apply to cryptocurrency trading platforms, including DeFi systems. Additionally, this statement gave more information about systems included in a new proposed exchange definition.

Furthermore, Gensler added that the SEC’s plan to revise investment adviser custody standards would apply to all crypto assets and strengthen the safeguards given by certified custodians.

Criticism Over Testimony

Gensler’s approach to regulating cryptocurrency is sure to draw criticism from House Financial Services Committee Chair Patrick McHenry. In April, McHenry charged Gensler of failing to provide clarification on how firms can comply with federal securities rules.

“You’re punishing digital asset firms for allegedly not adhering to the law when they don’t know it will apply to them. That’s nonsensical,” McHenry remarked  in April.

On the other hand, other Democrats, including Rep. Maxine Waters, D-Calif., have backed with Gensler  and stated that securities laws can work for crypto companies.

In July, the House Financial Services Committee moved forward with two bills, as per Gensler’s testimony. One proposal aims to update cryptocurrency market rules, including a process for a digital asset to change from a security to a commodity. The other focuses on overseeing stablecoins.

Coinbase will host ‘Stand with Crypto Day’ in Washington, DC, while Gensler testifies nearby. According to a blog post , they aim to meet with lawmakers and government officials to discuss how cryptocurrency is producing jobs in their areas.

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