Emmer accuses Gensler and the SEC of "pushing American firms into the hands of the [Chinese Communist Party]".
Emmer entered into the record a WSJ article about crypto going to China. I believe it was this one: https://www.wsj.com/articles/hong-kong-banks-are-netting-crypto-customers-as-citys-push-gains-steam-ccb5811f
Rep. Gottheimer (D-NJ, member of blockchain 8) says he's concerned about the SEC is regulating by enforcement and not through formal guidance. Gensler says they have been issuing guidance.
Rep. Loudermilk (R-GA): "What I see in industry is a decentralization of information because of the risk of disclosure. Blockchain. Many industries are going to blockchain because you're no longer centralizing. When it's centralized, there's a one-stop shop for the bad players to come and get information about individuals."
"Is it easier to protect decentralized investor information held by thousands of firms, or do you feel it's more secure to centralize that in a database administered from Washington, DC?"
๐ฅด
Loudermilk: "Let me tell you, there is no one in the information systems industry that's worth their salt that will tell you that it's more secure to have information at one point, one-stop-shop so if I'm a bad guy, I'm a foreign player, I've only got one spot to go to pull all this information. I'm going to put all my investment, all my technology in breaking your security to get that information." 1/2
"... Versus thousands of places that I do not have the resources to do that. Centralizing is a security risk." 2/2
I have a headache now.
I think he was talking about the Consolidated Audit Trail, but uhh
Rep. Meeks (D-NY) speaks of the NYDFS BitLicense regime for crypto. He asks Gensler for his thoughts on the repeated claims that crypto businesses will just go offshore.
Gensler: "If they're compliant with laws and doing right by investors, they can be here."
Rep. Torres (D-NY, member of the blockchain 8) is trying to draw a distinction between "high-risk... offshore, deregulated, over-leveraged companies ... like FTX" and other parts of the crypto industry.
Torres bashes SEC for what he views as targeting Coinbase not Binance, and Paxos not Tether. Accuses him of not learning from the FTX failure.
Gensler agrees that US investors are accessing crypto markets via on- and off-shore exchanges, and that the SEC has jurisdiction over any company serving US investors.
Gensler on offshore crypto companies: "It takes longer to build the investigative files, sometimes in cooperation with offshore enforcement authorities to pursue that, and it is frankly more challenging to actually get subpoenas complied with and so it takes longer in time."
Davidson is pressing on SEC's claims that EthereumMax is an unregistered security, which he seems to be suggesting is listed on Coinbase (and thus Coinbase is offering unregistered securities). Did Coinbase list EMAX or is he confusing EMAX and Ethereum? :๐ง:
Davidson describes SAB 121 as "punitive", asks if Gensler believes it should be amended.
Davidson: "Your record of failures to protect investors and abuses of power make it clear we need to restructure the SEC."
Rep. Rose (R-TN) wants to know how Gensler "went a whole year" without testifying in front of the Committee. Rose asks if the Dems never reached out to him to testify, or if he refused. Gensler says "I stand ready to be here".
Rep. Steil (R-WI) is doing "but his emails" for Gensler. Gensler says he's not used personal emails to conduct SEC business. Steil asks if he has multiple emails, Gensler says he has two, both publicly listed.
Steil asks if Gensler has a crypto wallet, or if he or his staff own crypto. He says ethics rules prohibit it. Steil is suggesting they are "in the business of making rules and regulations" despite never having personally owned crypto. :๐:
Insider trading is good actually โ Rep. Steil, I guess
Rep. Pettersen (D-CO) asks about AI regulation. "It's much more transformative than anything we've discussed about crypto", says Gensler. "I really think it's going to bring great progress for the country", says SEC is focused on possible conflicts in roboadvising.
Rep. Timmons (R-SC) references a 2014 NYT op-ed by Jared Bernstein, where he claims Bernstein (Biden nominee for economic advisory council) advocated for the US to actively take steps to remove the USD as global reserve currency.
Asks if Gensler thinks the US govt should take steps to actively remove USD as global reserve currency, and says he's concerned that he feels he can't predict how Gensler will answer. Gensler says he's not familiar with the op-ed.
Gensler says that the SEC's responsibility is to support capital markets, and strong capital markets support USD dominance.
Timmons soapboxes about how terrible he feels Biden's nomination is, how devastating the loss of USD dominance would be.
This is op-ed Timmons was referencing: https://www.nytimes.com/2014/08/28/opinion/dethrone-king-dollar.html
Rep. Meuser (R-PA) is arguing that various SEC individuals (Gensler, someone married to a former FBI agent, and SEC general counsel who worked on Trump impeachments) should've recused from the Trump-tied SPAC merger issue.
Gensler: "With all respect, there's no conflicts here. This is just a matter of making sure that filings with the SEC have the full, fair, and truthful disclosures in those documents."
Meuser: "Of course. Will the SEC ever approve the DWAC/TMTG merger?"
Gensler: "We don't have a role in approving or disapproving mergers. We do have a role in overseeing the disclosures with regard to those mergers."
A vote's been called on the House floor, so they're going to get through a few more people, then recess for the votes and restart the hearing when they have bipartisan attendance.
Gensler states that he thinks AI will be "as transformative as the Internet".
"Even this hearing right now might be being fed into a sentiment analysis to analyze... and the markets go up or down based on what the Chair said."
Gensler states that he thinks AI will be "as transformative as the Internet".
"Even this hearing right now might be being fed into a sentiment analysis to analyze... and the markets go up or down based on what the Chair said."
Rep. Kim (R-CA) is the most up-front so far today about the fact that she is speaking on behalf of industry actors who want the SEC to back off.
They're going to recess now.
Aaaand we're back! Rep. Garbarino (R-NY) is up now, asking if the SEC has coordinated with CISA or other agencies on drafting regulations. Gensler says yes.
Rep. Flood (R-NE) is asking why Gensler has not responded to the letter he sent 2โ3 weeks ago, then didn't let him reply. Flood is strongly suggesting that Gensler ignored his letter because Gensler thinks Flood is low in the pecking order lol
Gensler: "Putting crypto assets off balance sheet is a recipe for further risk in the system and disaster for the system."
Rep. Lawler (R-NY): "Does the SEC deserve any culpability for the collapse of FTX?" Lawler wants a yes or no answer, which he is not getting and not likely to get based on Gensler's answers today so far lol
Lawler: "Why didn't the SEC take action on FTX's alleged secret lending of at least $4 billion to Alameda Research?" Gensler replies he's not able to talk about specific companies or investigations.
Gensler: "I will say, all of these companies should come into compliance with the law, and until they do, we will continue to pursue as the cop on the beat and investigate and follow the facts and law. But it takes time to build cases, it takes time to do them as thoughtfully and carefully as you'd want us to do."
Lawler: "I just want you to answer my question, but.. that's fine."
Lawler asks Gensler about comment periods, Gensler says SEC values feedback.
Lawler: "Let me remind you that at a Bloomberg conference you said you don't trust industry participants to provide honest feedback, so do you actually benefit from comment periods or no?"
Gensler: "Yes, we very much benefit."
Lawler: "So you take back your comments where you said you don't trust their feedback?"
Note:SEC comment periods seek comments from the broad public, not just industry participants.
Rep. Houchin (R-IN) provides three quotes in which Gensler clearly states that the vast majority of crypto tokens are securities, then asks how people can have clarity if his views have changed so much.
lol wat
Gensler: "Let me just say: we have a clear regulatory framework built up over ninety years. It's just a bunch of intermediaries in this market that think they have a choice. They don't have a choice. They're noncompliant generally, and they need to come into compliance."
Houchin: "Given your own statements have vacillated, I think it's clear that the lack of clarity on this issue hasn't done anything to help this industry thrive in the US. There's constant threat of regulation by enforcement, and that has driven innovators elsewhere."
Rep. Ogles (R-TN) is following up on Huizenga's line of question earlier about the SBF document. He wants the memo regarding the SEC charges, Gensler is explaining that internal documents are kept confidential to protect investigative files.
Ogles is explaining that the document could be reviewed in a SCIF or under other various measures to protect confidentiality. He's very irritated with Gensler, accusing him of "preaching" around the confidentiality issue.
Rep. Ogles to Gary Gensler: "You're either intentionally obstrutching [sic] .... [long pause] .... or you're not just a good man. Alright? No offense."
Rep. Donalds (R-FL): "You've said that the players in the digital asset space don't have a choice, that they have to comply with the rules. But once again, Congress has never given you a framework for regulating digital assets. Where are you pulling that one from?"
Gensler explains that the SEC has a broad mandate.
Rep. Donalds: "Congress painted with a broad brush in 1933 and 1934 not in 2023! We've not touched that! It's a new industry!"
Rep. Donalds: "Hey real quick last question. I think it might've came up. You were Hillary Clinton's CFO on the campaign, right? ... Did you facilitate the payment for the Steele Dossier since you were CFO of the Hilary Clinton campaign? Yes or no. Yes or no!"
Gensler: "That was not something..." Donalds: "You're under oath, Chairman Gensler! Yes or no." Gensler: "I know. It was not something I was aware of."
And with that bizarre ending, the hearing is over.
@molly0xfff thanks for your hard grueling work ๐
Rarely have I ever heard such concentration of BS in such a short timeโฆ then again, I'm lucky enough to be able to stay away from US politicians
"No offense," he lied.
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