The SEC has the tools to provide clear guidelines, but chose not to – Commissioner Hester Peirce

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The House Financial Services Committee today conducted a hearing with US SEC Chairman Gary Gensler and four other commissioners: Caroline A. Crenshaw, Hester Peirce, James Lizarraga and Mark Uyeda. This is the first time the commissioners have testified together before Congress since 2019.

Patrick McHenry, chairman of the House Financial Services Committee, again asked Gensler about the multiple terms used to address digital assets and a potential lack of clarity to define which tokens are securities.

Following Gensler’s standard response that the token economy is more important than “labels” to define what a security token is, Peirce said there is no regulatory clarity to define the various digital assets when put to questions by McHenry.

“We have taken a legally imprecise view to mask the lack of regulatory clarity,” added the commissioner.

Peirce further explained that the SEC is intentionally ambiguous when it comes to defining whether a token is a security or the investment contract related to it.

“By using imprecise language, we were able to suggest that the token itself is a security apart from that investment contract, which has implications for secondary sales, which has implications for who can list it. I think we’re falling short of our duty as a regulator, to be precise.”

The commissioner, also known as “Crypto Mom,” said admitting that the token itself is not a security is something that should have been done “a long time ago.”

McHenry therefore asks Peirce if clarity on crypto rules is something the SEC itself can provide to the market, with the commissioner confirming that the regulator has that power in its hands.

“We can provide guidelines and we choose not to,” she added.

Regulation by enforcement is not effective

French Hill, chairman of the Subcommittee on Digital Assets, Financial Technology and Inclusion, was the next member of the congressional hearing to question SEC officials.

Hill’s first question was about the effectiveness of the “approach to regulation” and was addressed to Peirce. The commissioner said this is a “very poor approach” to regulating an industry and is not effective when it comes to protecting investors and using the SEC’s resources appropriately.

The best course of action, according to Crypto Mom, is to define clear lines where the SEC should act and direct regulatory resources to those questions, providing clarity on the regulator’s jurisdiction.

The Digital Assets president then asked Commissioner Mark Uyeda if the SEC can provide the clarity the US crypto industry is asking for.

Uyeda then confirmed that the SEC has a “wide range of existing tools” to address the current lack of clarity, noting that the regulator can provide clarity on matters such as what symbols are securities, as well as exchange-traded compliance crypto related. products (ETP), custodians and brokers.

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