"The bill appears to halt any enforcement actions by the SEC against crypto firms, even when they have committed fraud," ranking member Maxine Waters, D-Calif., said in her opening statement, adding that the bill " could reward bad actors with a 'get out jail free' card and allow them to continue harming consumers and investors."
Last week, the SEC filed enforcement actions against cryptocurrency exchanges Binance and Coinbase. On Thursday, SEC Chairman Gary Gensler said at the Piper Sandler Global Exchange & FinTech Conference that the enforcement actions were needed to protect investors.
"When intermediaries don't register, it's investors who get hurt and the American financial markets that may suffer," Mr. Gensler said.
Rep. Ann Wagner, R-Mo., said Mr. Gensler "continues to regulate by enforcement," echoing statements from GOP lawmakers who have called for legislation.
However, Aaron Kaplan, founder and Co-CEO of Prometheum, told lawmakers, "There is a compliant path forward for crypto in the United States that the SEC has clearly laid out."
Prometheum Ember Capital, a subsidiary of Prometheum, recently received a first-of-its-kind approval from the SEC's Financial Industry Regulatory Authority to operate as a special purpose broker-dealer for digital asset securities. This means the company can custody digital asset securities for both institutional and retail investors.
"Those who argue for new laws are simply not willing to comply with existing applicable securities laws and regulations," Mr. Kaplan said. "New legislation is not in the best interest of the investing public or the blockchain industry."
Some Democrats seemed to agree with Mr. Kaplan.
"We're told that we need clarity (for the digital asset industry); we have clarity," said Rep. Brad Sherman, D-Calif. who has been an outspoken crypto critic.
On the other hand, Mr. McHenry said that legislation is needed because without it, America is "at risk of falling behind competitors around the globe."
Ultimately, Mr. McHenry said the bill is still a draft, and while there's time "to find common ground," he intends to hold a vote on the bill after the July Fourth recess.