Congressman Grills SEC Representative on Crypto Regulation and Clarity

• Congressman Tom Emmer criticized the SEC’s lack of clarity on crypto regulation.
• SEC’s representative failed to answer affirmatively whether the agency has issued any guidance on how security laws apply to crypto.
• The Congressman accused the agency of deliberately obfuscating the regulatory issue.

In a recent congressional hearing, U.S. Congressman Tom Emmer engaged in a heated exchange with Valerie Szczepanik, the Head of the Strategic Hub for Innovation and Financial Technology at the U.S. Securities and Exchange Commission (SEC). 

The interrogation focused on the SEC’s approach to crypto regulation and the level of clarity provided to the market about how crypto assets can be deemed securities.

Congressman Emmer began by referencing a speech delivered by Bill Hinman, former SEC Director of the Division of Corporation Finance, in 2018. The speech discussed the transformation of tokens from securities to non-securities, notably declaring Ethereum not to be a security. Emmer questioned Szczepanik about her role in reviewing and commenting on drafts of Hinman’s speech, which she affirmed.

Furthermore, Emmer highlighted Szczepanik’s suggestion in the draft review process, which was that providing less detail in the speech would be beneficial. Also, he pointed out that she believed the concept of a token morphing from a security to a non-security would generate significant discussion. 

In parallel, Emmer insinuated that this approach contributed to a lack of clarity in the market and questioned whether the current SEC chair shared the same view. Szczepanik responded by noting the facts-and-circumstances-based nature of determining whether an asset is a security. 

Szczepanik attempted to clarify that her role at Finhub is to provide relevant information to SEC staff involved in making such determinations. Emmer further pressed Szczepanik on whether Finhub had issued any guidance since the tenure of SEC Chairman Gary Gensler began to clarify how security laws apply to crypto. 

The SEC representative provided no direct response to the question. Her reply suggested that Finhub typically collaborates with other SEC divisions and offices issuing statements, indirectly implying that Finhub had issued no specific guidance. 

Based on the outcome of the intense questioning, to which Emmer believed the SEC representative provided no satisfactory answer, the Congressman concluded that the lack of clarity in crypto regulation was a deliberate action from the SEC. Emmer described the situation as a “complete disservice to our great capital markets.”