Republicans on the House Financial Services Committee told the SEC on June 12 to withdraw proposed regulations related to crypto exchanges.
Republicans oppose a broadened definition
In particular, lawmakers expressed concern about a proposed U.S. Securities and Exchange Commission (SEC) amendment that would expand the definition of “exchange” under Rule 3b-16 of the Securities Exchange Act of 1934.
Republican lawmakers wrote:
“Given the objectives of this proposed rule, it is clear that [SEC Chair Gary Gensler] uses this proposal to put forward his own personal views on digital assets.
The lawmakers suggested that the proposed rule change, if successful, could “capture a wide range of individuals,” including cryptocurrency software developers, blockchain consensus participants, and decentralized finance (DeFi) systems.
Lawmakers said it’s unclear why those parties could be considered an exchange under securities laws, adding that it’s unclear how they can comply with the proposed rule change, as many don’t have access to the data needed for compliance.
Lawmakers also claimed the change would affect more of the crypto industry than the 15 to 20 platforms the SEC believes will be classified as exchanges.
Lawmakers warn of the consequences
Republican lawmakers urged the SEC not to extend Gensler’s oft-voted opinion that many cryptocurrencies are securities to platforms that handle these cryptocurrencies. They warned that the proposed change will “shoehorn” blockchain technology into legacy regulations rather than promote development and customer protection.
Lawmakers also said the SEC’s planned change could “front” Congressional legislative efforts. Two parliamentary committees are working on a market structure for digital assets; those plans will be discussed simultaneously at a June 13 hearing.
The SEC’s proposed rule change has been under consideration in some form since September 2020, and Republican lawmakers are the last to resist.
SEC Commissioner Hester Peirce objected to the proposal as it continued to develop in January 2022. Industry members, including Coinbase, have also objected. The SEC reopened comments on the proposal in April 2023.
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