Following the FTX saga, members of the US Congress have accused the US SEC of being negligent. Recently, members of the Democrats have been divided over how Gary Gensler has handled the crypto sector.
Congress has called the FTX crisis a “massive, years-long fraud” that Gensler could have prevented.
SEC Failed To Protect Consumers – US Lawmaker
The FTX scandal has uncovered an enormous split between Democrats. There appear to be two factions with different opinions on the matter. Crypto-skeptic Democrats have shown massive support for Gensler.
According to Gensler, most crypto entities do not operate within the existing law. However, other Democrats believe the agency has misplaced priorities.
Unfortunately, this split could make crypto regulation difficult from now on. It could also mount more pressure on the SEC chair, who is currently under the scrutiny of Republicans.
It is worthy to say that Republicans have more seats in the House of Rep. Last week, the House Financial Services Committee had a hearing on the FTX saga.
At the meeting, Josh Gottheimer of New Jersey argued that the SEC failed to protect investors. Gottheimer said:
“Gensler has claimed several times that the current securities laws apply to most cryptocurrencies. However, the regulator has not issued any guidelines for digital assets.”
Another New York lawmaker, Ritchie Torres, criticized the SEC chair at the hearing. Torres noted that Gensler had been SEC chair for two years.
Also read:Yet, he did not implement one single rule to enforce greater accountability and transparency in the crypto industry. Additionally, Torres called Gensler a “commentator” who has failed to act as a “regulator.”
Surprisingly, the former FTX CEO, Sam Bankman-Fried, donated about $14,500 to Torress during his campaign. The Democrat argued that he plans to return the money soon.
On December 6th, Torres critiqued SEC in a letter. He asked the US Government Accountability Office to reevaluate SEC’s stance on digital assets. Interestingly, the Democrat does not believe the agency investigated the FTX exchange thoroughly.
“It is possible that SEC thoroughly investigated FTX. However, the GAO should conduct a review of the agency’s activities,” the legislator added.
Since the GAO is not affiliated with any political party, Torres believes the result of the review would help legislators craft guidelines for crypto assets.
Republicans To Divide Digital Assets Into Commodities And Securities
On the other hand, several legislators congratulated the SEC for its stance towards crypto. Alexandria Ocasio-Cortez, a legislator for the D-N.Y., argued that the SEC does not have total jurisdiction over the crypto sector.
She also asked Congress to examine the shifting of such jurisdiction to the CFTC concerning the Bankman-Fried case. Ocasio-Cortez is among the famous progressives in the US Congress.
She believes the CFTC should have more power to oversee crypto exchanges. Meanwhile, Sherrod Brown, the Chairman of the Senate Banking Committee, assured lawmakers that he was working with Gensler on crypto matters.
Furthermore, Republicans argued that Gensler should have been at the hearing. They want to know the level of his involvement in the FTX crisis.
Meanwhile, the Republicans in the Financial Services Committee have decided to establish definitions for digital assets. This will determine which digital assets are under the SEC’s jurisdiction and which are not.
Patrick McHenry, the next chairman of the Committee in the forthcoming Congress, said:
“We have decided to legislate on which digital assets fall under security and those that fall under commodities.”
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