House Republicans criticize current approach to crypto regulation

In a newly GOP-controlled House, lawmakers are continuing their discussion on cryptocurrency regulation, with many Republicans criticizing the Biden administration and SEC's current approach to regulating the space and calling for comprehensive legislation.

"To all the members of this committee, no matter what your views are about crypto, it's imperative that we recognize the unique role of Congress to legislate, and that no amount of enforcement actions or regulatory guidance can ever replace that or be a substitute," said Chairman French Hill, R-Ark., at the first hearing for the Subcommittee on Digital Assets, Financial Technology and Inclusion on Thursday. The hearing was titled, "Coincidence or Coordinated? The Administration's Attack on the Digital Asset Ecosystem."

The White House unveiled a framework for managing digital assets in the U.S. in September, following an executive order President Joe Biden issued in March 2022. Among several other recommendations, the framework encouraged regulators like the SEC and Commodity Futures Trading Commission to investigate and enforce actions against unlawful, abusive or deceptive practices in the cryptocurrency industry.

In recent months, the SEC has upped its enforcement against cryptocurrency firms, charging several with offering and selling unregistered securities, including Genesis Global Capital and Gemini Trust Company.

"The SEC has decided the best way to communicate on what the law is regarding digital assets is through enforcement actions," said Rep. Frank Lucas, R-Okla.

Mr. Hill expressed doubt regarding SEC Chairman Gary Gensler's claims that digital asset companies can simply "come in and register" with the agency, asking Coinbase Chief Legal Officer Paul Grewal if this holds true. Mr. Grewal said it is not, as Coinbase "very much wishes to register with the SEC" but is unable to.

Separately, the Federal Reserve Board, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency released a joint statement in January, warning banks of the risks that digital assets pose to the banking system.

"This administration is weaponizing the banking sector to debank legal crypto activity here in the U.S., using scare tactics to run an entire industry out of the country," said Rep. Tom Emmer, R-Minn. "And the collapse of FTX should warn us of the vulnerable position we are putting American consumers in when we don't compete to keep crypto firms onshore."

Ranking Member Stephen Lynch, D-Mass., brought up the collapse of FTX as well, expressing concern that the crash was a prime example of what could happen in the future if the industry continues to remain unregulated.

Mr. Lynch also defended the actions of the Biden administration and SEC, saying there's a "false narrative" that the SEC regulates through enforcement and makes it difficult for cryptocurrency firms to come into compliance.