Senator Pat Toomey wrote a letter to SEC chairman Gary Gensler earlier this week, in which he blamed him for his lack of regulatory clarity towards crypto companies, which resulted in billions of losses for American consumers.
Senator Toomey is a crypto-friendly legislator, and he has made it his business to try and obtain fair treatment for crypto companies, who he believes are suffering due to a “sluggish enforcement pace”, which is harming investors and stunting innovation. The Senator opened his letter with the following damning indictment of Gensler and the SEC:
“I write to express my concern about the Securities and Exchange Commission’s (“SEC”) uncompromising refusal to give regulatory clarity to the cryptocurrency community and consumers. Instead, the SEC has pursued a capricious and ineffective approach to consumer protection known as regulation-by-enforcement that is chilling financial innovation and contributing to significant financial losses for unsuspecting American consumers.”
Senator Toomey accused the SEC of “selective enforcement” and of failing to clarify how existing securities laws would apply to the new digital world of cryptocurrencies, thereby allowing companies to adjust their product offerings.
“Had the SEC responded to calls for clarity on how it would apply existing securities laws to novel digital assets and services, things might have been different. Companies could have adjusted product offerings accordingly, preventing investor losses today, and the SEC would have been free to focus enforcement efforts on the worst actors.”
The Senator laid out why it was not clear whether a company was a security or not, saying that “an associated token may not give its owner any claim to the profits or assets of an enterprise,” and also whether a token could give reasonable expectation of profit or investment in a common enterprise under the Howey test, saying that a security token has both of these features.
Senator Toomey ended the letter with 8 questions which were likely calculated to put the SEC on the spot as to their actions thus far. The Senator requested that answers be provided no later than 9 August 2022.
The Senator signed off with one last salvo:
“I hope when you urge crypto firms to “come in and talk to us,” you will have the SEC provide clear and useful feedback.”
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