Garry Gensler spent over 3 hours being grilled by US lawmakers about crypto-related regulations.
Gary Gensler, the Chairman of the United States Securities and Exchange Commission (SEC), recently found himself under scrutiny during a prolonged session with the House Financial Services Committee.
Much of the hearing centered on the SEC's controversial Staff Accounting Bulletin (SAB) 121, which deals with public companies holding crypto assets in custody.
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During the September 27th hearing, Gensler stated he enjoys testifying before the committee. However, the recent hearing may have been less enjoyable as man faced criticism over the SEC's policies.
Representative Mike Flood voiced his opinion on the SEC's SAB 121 issued in March 2022. This bulletin concerns the accounting and disclosure requirements for crypto assets held by public entities like Robinhood, Coinbase, and various banks.
Flood took issue with the fact that the SEC did not consult with prudential regulators before issuing SAB 121. Moreover, he pointed out that the Financial Accounting Standards Board (FASB), responsible for establishing accounting principles, only added digital asset accounting standards to its agenda in May 2022, well after SAB 121 was published.
During the hearing, Flood reminded Gensler of his previous testimony, where he claimed that SAB 121 was elaborating on existing SEC rules. Gensler responded by mentioning a 2009 rule on the custody of digital assets by investment advisers and a rule finalized in April 2021 regarding special purpose broker-dealers.
Flood retorted that these were not direct rules concerning the custody of digital assets. He also stated that rulemaking on digital asset custody was only proposed in February 2023 and remains unfinished. Flood concluded by saying:
The SEC’s justification for issuing the bulletin is based on accounting guidelines that did not exist when the bulletin was issued.
He further insinuated that the SEC either knowingly issued the bulletin without substantial justification or made an error.
The issuance of SAB 121 had been controversial from the outset. SEC commissioner Hester Peirce issued a critique on the same day it was published. Five senators, including crypto advocate Cynthia Lummis, also penned a letter to Gensler calling the bulletin "regulation disguised as staff guidance."
Beyond the issue of SAB 121, several Financial Services Committee members sent a letter to Gensler a day before the hearing, urging approval for spot Bitcoin exchange-traded funds (ETFs).
The recent hearing exposed contentious views between House Financial Services Committee members and SEC Chairman Gary Gensler, particularly on SAB 121 and crypto custody regulations. As the regulatory landscape around digital assets evolves, these interrogations underscore the complexities and divergent opinions in this burgeoning field.
