Congress members concerned SEC stifling innovation with crypto scrutiny

In a bipartisan letter put forward by Republican Minnesota Congressman Tom Emmer, a cohort of Congress members has written to Securities and Exchange Commission (SEC) Chairman Gary Gensler, challenging the regulator’s scrutiny of cryptocurrency firms and expressing concern that “overburdensome” investigation may be suffocating the crypto industry.

They suggest the SEC is drowning companies in paperwork in contravention of the SEC’s stated aims and mandated jurisdiction.

Emmer tweeted to his 51,000 followers:

“My office has received numerous tips from crypto and blockchain firms that SEC Chair @GaryGensler’s information reporting ‘requests’ to the crypto community are overburdensome, don’t feel particularly… voluntary… and are stifling innovation.”

This is why I sent a bipartisan letter today to SEC Chair @GaryGensler with @RepDarrenSoto, @WarrenDavidson, @RepAuchincloss, @RepDonaldsPress, @RepJoshG, @RepTedBudd, and @RepRitchie regarding the SEC’s crypto information seeking process. pic.twitter.com/8HcTgZA0XL
— Tom Emmer (@RepTomEmmer) March 16, 2022

In the letter, which was co-signed by four Democrats and three Republicans, all of whom are members of the bipartisan Congressional Blockchain Caucus, Emmer asserts that the Gary Gensler-led SEC is abusing its investigative powers and overburdening crypto firms — claiming that the regulator has been using the Division of Enforcement and Division of Examination authorities to unfairly bog down crypto and blockchain companies in excessive paperwork.

The legislators believe the regulator has been misusing these divisions and pointed out limitations in the SEC’s mandated jurisdiction,

“It appears there has been a recent trend towards employing the Enforcement Division’s investigative functions to gather information from unregulated cryptocurrency and blockchain industry participants in a manner inconsistent with the Commission’s standards for initiating investigations.”

The Congress members believe the SEC could be violating the Paperwork Reduction Act (PRA) of 1980, which regulates the volume of paperwork that any individual or private entity needs to provide to a federal agency.

Managing Partner at emerging technologies legal firm Brookwood, Collins Belton lauded Emmer’s work on Twitter, saying that the requests in the letter “will not paint the commission in a good light.”

This is actually an interesting move I wasn’t expecting, clearly some of y’all in DC have gone to work. The requests in the letter are particularly on point and will *not* paint the commission in a good light imo, and that’s solely off of the requests I’m personally aware of. https://t.co/ElguJ77sEa
— Collins Belton (@collins_belton) March 16, 2022

Belton also shared that he was “really glad” the issues raised by Emmer and the other Congress members were coming to light, as legal privilege had made it difficult for him to express concerns about the SEC publicly.

“I haven’t been able to discuss much in public as much as I would like to due to privilege issues, but with answers to some of these, I think the public will see just how absurdly broad some of these requests have been.”

Emmer has been a staunch defender of blockchain technology and cryptocurrency in the past, introducing the Security Clarity Act in Jul. 2021, which aimed to provide a clear legal definition for digital assets. Emmer hopes that the bill will allow blockchain entrepreneurs to distribute their assets without fear of any additional regulatory burdens, after meeting the requirements set out in the bill. The bill is still in its introduction phase and is yet to pass through the House of Representatives.