Gensler Called to Engage with Congress

In the wake of the recent court ruling in the Ripple case, there is a call to action for Gary Gensler, the chairman of the Securities and Exchange Commission (SEC), to collaborate more closely with U.S. Congress.

This plea comes primarily from Congressman French Hill, who has urged Gensler to participate in ongoing discussions around legislation for the regulation of digital assets. They believe that creating such laws will provide a more substantial safety net for digital asset users than merely relying on enforcement actions.

French Hill and Dusty Johnson, both influential members of Congress, have sent a letter to Gensler emphasizing the necessity for a comprehensive regulatory framework to foster a well-regulated digital assets marketplace. 

The House Committee on Financial Services and the House Committee on Agriculture have prioritized the establishment of this framework, deeming it crucial for the U.S. to continue benefiting from the growth and innovation of markets utilizing digital assets and blockchain technology.

The letter cites that over the past four years, more than 15 hearings have taken place regarding digital asset policy, revealing significant regulatory gaps. Two crucial bills were introduced to tackle these gaps: The Clarity for Digital Tokens Act, proposed by Chairman McHenry in 2021 to create a regulatory safe harbor for new digital asset projects, and The Digital Commodity Exchange Act, introduced by Chairman Thompson in 2022 to set up a regulatory regime for digital commodities.

Despite the Congressional efforts to establish comprehensive laws for digital assets, it seems that the SEC has chosen a different approach. The SEC’s decision to regulate by enforcement, instead of actively participating in legislative discussions, has raised concerns.

It has led to further confusion, as exemplified by the recent Ripple case. The letter concludes with a call for constructive engagement with the SEC on this groundbreaking legislation, urging for the establishment of clear rules to close the digital asset market regulatory gap.

They argue that future issues could be preemptively mitigated with proper legislation rather than reactively punishing violators after the damage has already occurred.