Republican members of the Securities and Exchange Commission on Tuesday sharply criticized the agency's operations under Democratic Chairman Gary Gensler, who defended his tenure in a joint address by all five commissioners.
SEC Commissioner Hester Pierce, who has been mentioned as a possible replacement for Gensler under a second Trump administration, criticized the SEC’s approach to digital assets, suggesting the agency has “failed in its regulatory duties.”
“We've taken legally vague positions to hide regulatory uncertainty,” Pierce told the House Financial Services Committee, adding, “Legal clarity has real-world consequences, so I think we're trying to be vague.”
Pierce's criticism appeared to be primarily aimed at Gensler, who was seated just feet away from the Republican committee members and had minutes earlier defended his approach to regulating digital assets.
Gensler has long argued that determining whether digital assets like cryptocurrencies are securities subject to SEC regulation comes down to a legal framework known as the Howey test.
He argued Tuesday that “court after court” has ruled that the Howey test is “in fact very clear.”
However, the cryptocurrency industry has frequently expressed dissatisfaction with the framework, arguing that there is still a lack of clarity about how and when to comply with the SEC's rules to avoid costly enforcement actions.
Republican lawmakers who have strengthened ties to the cryptocurrency industry repeatedly turned to Pierce on Tuesday to denounce Gensler's approach.
“If we're trying to protect investors and be good stewards of the commission's resources, trying to regulate an industry is a very bad approach,” Pierce said in response to a question from Rep. French Hill (R-Arkansas).
“This is hugely inefficient and ultimately leaves everyone wondering where the boundaries of our authority are,” she continued.
Republicans in the House of Representatives led the effort to establish a new framework for digital asset regulation through the Financial Innovation and Technology for the 21st Century Act (FIT21), which passed the House in May by a vote of 279-136, with 71 Democrats and 208 Republicans supporting the bill.
After FIT21 passed, Gensler blasted the bill, arguing it would “create a new regulatory vacuum and undermine decades of precedent.”
Pierce said Tuesday that “it's always useful to hear from Congress,” but also suggested it was within the SEC's authority to provide guidelines that it has “chosen not to provide” thus far.
Despite the divisions within the agency that were evident on Tuesday, there were moments of camaraderie among commissioners.
“We've done very well as a committee and we've functioned very well as a committee,” Pierce said, adding, “We have a huge capital market in the United States and we need to protect that, and that's what we're all striving for.”
“I want to complement what my fellow committee members said: I think the five of us get along really well,” Gensler said later. “We have policy differences, but that's by design. Congress wanted this to be a lively debate… I really believe in the give and take that we have.”
