Some Republicans on the committee, broadly against added disclosures, cautioned Mr. Gensler in this area.
"Just because the SEC generally does a solid job regulating disclosure about financial statements doesn't mean it's well-qualified to regulate around environmental topics," said. Rep. Bill Huizenga, R-Mich. "To me, the SEC requiring disclosure on ESG metrics is like if we required the gymnastics judges to judge the diving events — similar, but they're not qualified."
Following a question from Rep. Nydia M. Velazquez, D-N.Y., Mr. Gensler said a "majority of the biggest 500 companies currently do voluntary disclosures in this space and trillions of dollars of assets under management have asked for disclosure. So I think this is a place where there's a real role to help bring consistency and comparability, some standardization that would help both the companies and the investors."
On cryptocurrency, Rep. Patrick McHenry, R-N.C., the committee's ranking member, sent a letter to Mr. Gensler shortly before the hearing started Tuesday asking for clarification on how he thinks the SEC should regulate the asset class.
"There are far-reaching consequences for the SEC's decisions as to whether and how to deploy the agency's powerful tools," Mr. McHenry said in the letter. "For that reason, investors and other market participants expect the SEC to act based on an impartial assessment of the law and the facts as determined by the commission, not the chair's impromptu public pontifications."
Mr. Gensler has said multiple times in recent months and again Tuesday, that there is not enough "investor protection in the crypto finance, issuance, trading or lending area."
Mr. McHenry said he introduced a bill Tuesday called the Clarity for Digital Tokens Act of 2021, which he added is based on a proposal SEC Commissioner Hester M. Peirce first outlined in 2020. Her proposal would establish a three-year safe harbor for cryptocurrency firms interested in offering tokens so they "could facilitate participation in and the development of a functional or decentralized network, exempted from the registration provisions of the federal securities laws," as long as certain conditions were met.
In April, Ms. Peirce unveiled an updated version of her proposal that would require semiannual updates and an exit report requirement at the end of the three-year grace period. The exit report would include either an analysis by outside counsel explaining why the network is decentralized or functional, or an announcement that the tokens will be registered under the Securities Exchange Act of 1934.
Mr. McHenry asked Mr. Gensler for his thoughts about Ms. Peirce's proposal: "She and I have talked about her thoughts on this around a potential safe harbor," Mr. Gensler said. "I think the challenge for the American public is that if we don't oversee this and bring in investor protection, people are going to get hurt."