Things have settled down a little since the SEC’s court losses against Ripple and Grayscale. However, the head of the federal regulator remains committed to crushing the industry by enforcement actions rather than regulation.
In written testimony to the Senate Banking Committee on Sept. 12, Gensler said:
“There is nothing about the crypto asset securities markets that suggests that investors and issuers are less deserving of the protections of our securities laws.”
Gensler Backlash Mounting
Despite mounting pressure against his claims that crypto assets are securities, Gensler has remained steadfast.
Bloomberg ETF analyst James Seyffart said that many Senators are going after him for the “avalanche of rule proposals in his administration that do not have the backing of Congress.”
Tons of senators are going after Gensler for the avalanche of rule proposals in his admin that do not have the backing of congress. Gonna be a key aspect to watch when/if the SEC starts losing cases in the courts via the major questions doctrine h/t @nathandeanDC @NYCStein pic.twitter.com/TU3sMrirYb
— James Seyffart (@JSeyff) September 12, 2023
Moreover, Gensler blamed the difficulties the embryonic digital finance industry faces on its non-compliance with securities laws.
“Given this industry’s wide-ranging non-compliance with the securities laws, it’s not surprising that we’ve seen many problems.”
However, he couldn’t be further from the truth. Decentralized digital assets and their underlying technologies do not constitute securities such as company-issued stocks. Even the courts recognized this in their ruling in favor of Ripple and the sale of XRP to retail traders.
Gensler defended his agency’s key rule-making initiatives amid heavy pushback from Republican lawmakers.
Representative Tim Scott questioned the SEC’s methods, according to reports.
“The regulations the SEC has proposed under your leadership are unjustified and are sowing discord and confusion for industry and market participants alike.”
Nevertheless, Gary Gensler remained proud of his agency’s ability to regulate by enforcement and churn out lawsuits.
“The SEC is the cop on the beat watching out for your constituents. In the last year, we’ve filed approximately 750 enforcement actions.”
SEC Harnessing AI
He also revealed that the SEC was using artificial intelligence technology to monitor the financial sector for signs of fraud and manipulation.
In a Sept. 12 Senate oversight hearing, Gensler was asked for details on AI usage, to which he offered a vague “We already do [use AI]. In some market surveillance and enforcement actions. To look for patterns in the market.”
However, he also warned that AI’s ability to generate deepfake content that easily fools humans poses a genuine threat to financial markets.