Republicans grill SEC Chair Gensler

SEC Chair Gary Gensler faced a grilling from Republicans on climate disclosure rule proposals and crypto regulations at a hearing before the Senate Banking Committee on Thursday.

Ranking Member Senator Pat Toomey (R-PA) accused the Biden administration of using the SEC as a tool to advance a liberal agenda, pointing to newly proposed climate-related disclosure rules.

Toomey asked whether the recent ruling from the Supreme Court that the EPA lacked authority under the Clean Air Act to regulate greenhouse gas emissions calls into question the climate disclosure rules.

“In light of the EPA versus West Virginia case, have you given any consideration to rescinding that rulemaking?” Toomey asked.

“We take seriously the courts, and particularly the Supreme Court,” Gensler replied. “We’re considering 14,000-plus comments in that comment docket. We’re considering it in light of our authorities and the law.”

Gensler said most of the comments have been supportive of investors using climate-disclosure information, and that it fits into the SEC’s history of how disclosures are made.

On the crypto front, Toomey also questioned Gensler over what constitutes a security, asking if it’s fair to look at whether a token is centralized as the basis for the categorization. Gensler said it’s not just whether a token is centralized or not, adding he also consults Supreme Court decisions and whether the investing public is anticipating profits.

Chair Gensler also revealed that there are only six crypto companies that have registered with the SEC in the wake of his repeated requests that crypto companies to proactively register with the agency.

Given that most crypto tokens are securities, Gensler said it follows that many crypto intermediaries, including exchanges and broker dealers — whether they call themselves centralized or decentralized — are transacting in securities and have to register with the SEC in some capacity.

Gensler told the Senate that the SEC is talking to a “wide swath” of crypto intermediaries to get them registered and properly regulated as well.

Senator Cynthia Lummis (R-WY), who along with Senator Kirstin Gillibrand (D-NY), has proposed comprehensive legislation to regulate cryptocurrencies, asked Gensler for his thoughts on proposed disclosures in the senators’ crypto bill for digital assets.

Gensler said the SEC is setting up a new industry office to help define disclosure rules for crypto within the agency’s corporate finance area.

The bill proposes disclosure obligations that would hold responsible those who benefited from raising funds, not the users of digital assets. Gensler agreed that exchanges and intermediaries should have the obligation to disclose, not investors, and said disclosures similar to the ones proposed in Senator Lummis and Gillibrand’s bill would work with some small differences.

Gensler said that, in general, crypto assets should have a different set of disclosure requirements, as is the case in other areas like asset-backed securities.

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