Regulation
How Gary Gensler’s Ethereum Claims Misled Congress
US Congressman Patrick McHenry has accused Securities and Exchange Commission (SEC) Chairman Gary Gensler of misleading Congress about the regulatory status of Ethereum.
The accusation follows recent sanctions handed down by a federal judge against SEC lawyers for dishonest legal dealings, hinting at a troubling trend within the agency.
Did Gary Gensler Mislead Congress on Ethereum?
During a session with the House Financial Services Committee, Gensler evaded direct questions about classifying Ethereum as security. Newly released court documents suggest this was an intentional move to confuse the Commission’s position.
This deliberate ambiguity marks a radical departure from previous SEC communications, which systematically separated Ethereum Typical Security Classifications.
This incident intensifies scrutiny of the SEC’s regulatory tactics under Gensler’s leadership, particularly its approach to digital assets.
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Congressman McHenry critical the SEC for its “arbitrary and capricious” enforcement methods and highlighted the need for legislative action. He advocated for the “FIT for the 21st Century Act,” aimed at establishing a comprehensive regulatory framework for cryptocurrencies to strengthen consumer protection.
“Classifying Ether as a security contradicts previous statements by the SEC and Chairman Gensler – yet another example of the arbitrary and capricious nature of the agency’s regulatory approach to digital asset enforcement,” McHenry said.
The controversy intensified when Consensys filed a lawsuit against the SEC. The dispute arose after the SEC issued a Wells Notice to Consensys as part of its “Ethereum 2.0” investigation.
The agency focuses on Ethereum’s transition to proof-of-stake consensus mechanism, which he believes could meet the security criteria of the Howey test.
Consensys claims that the SEC’s current position conflicts with its own prior statements. In 2018, former SEC Director Bill Hinman publicly stated that Ethereum was not a security. However, the SEC now appears to be moving away from this position, thereby contributing to a climate of uncertainty that jeopardizes the stability of the cryptocurrency market, estimated at several trillion dollars.
THE Proof of StakeOr fusion upgrade, it’s really kind of a hook from the SEC to try to say that Ethereum is a security. But I think that’s just a surface level point. Nothing about the proof of stake itself compared to Proof of work would make Ethereum a security. I think really it’s just an explanation for the SEC,” a Consensys spokesperson said. BeInCrypto.
Learn more: How to Buy Ethereum (ETH) and Everything You Need to Know
The outcome of this legal battle could significantly influence the regulatory environment for cryptocurrencies in the United States, impacting both innovators and investors.
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