Under Gensler, the SEC has taken more than 50 enforcement actions against crypto companies over fraud and failure to register securities, among other allegations.
Gensler told lawmakers Tuesday that the crypto industry’s business model is “built up around non-compliance.”
Rep. Patrick McHenry (R-N.C.), chairman of the House Financial Services Committee, criticized Gensler’s crypto lawsuits, arguing the law isn’t clear about whether crypto tokens are securities or commodities, which are regulated by the Commodity Futures Trading Commission.
“There’s a lack of clarity here in the marketplace. Can you at least agree to that?” McHenry asked the SEC chief.
“I think the clarity is there, the law is clear,” Gensler responded.
In a lengthy exchange with McHenry, Gensler refused to say whether Ethereum — the second-largest cryptocurrency — is a security. But he stressed that if crypto assets don’t play by the same rules as other investments, confidence in U.S. markets could be undermined.
Public faith in crypto took a hit following a slew of bankruptcies, including the failure of leading crypto exchange FTX. Its disgraced founder Sam Bankman-Fried worked with lawmakers on legislation that would have shielded the industry from SEC enforcement.
The crypto industry has cast Gensler as a hostile actor whose regulations and lawsuits are pushing crypto firms to operate overseas. GOP allies of the industry made similar points on Tuesday.
“Does it concern you that your approach to the digital asset industry is actually driving this industry out of the United States?” Rep. Tom Emmer (R-Minn.) asked Gensler.
“I’m trying to drive it to compliance, and if they’re not complying with the laws then they shouldn’t be offering their products to U.S. investors,” Gensler responded.
