SEC 'Crusade' Against Crypto Industry Must End, Congressman Torres Says

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The SEC faced another barrage of criticism from US Congressman Ritchie Torres, who urged chair Gary Gensler to end his ”crusade” against the cryptocurrency industry.

“@SECGov must reassess its reckless regulatory assault on the crypto industry,” Torres tweeted, after writing in a letter to Gensler that he must “come to terms with the folly of the Commission’s crusade against crypto assets in light of the latest decision by Judge Analisa Torres of the Southern District of New York.”

Here is the TLDR: pic.twitter.com/KcXQkJTVjX

— TheVoiceofDeFi (@VoiceofDefi) July 18, 2023

SEC Faces Ongoing Torres Criticism

Torres is increasing pressure on the SEC after the regulator suffered a partial setback in its legal action against Ripple Labs Inc. The SEC argued that Ripple’s payments token XRP is a security.

But a US district court ruled last week that XRP is not a security when it is sold to the public even though it is when sold to institutional investors. Crypto assets surged on the news.

Yesterday Torres wrote that ”regulation by enforcement had a dreadful day in court.” He also echoed the ruling by judge Torres “that digital assets are not securities in the abstract and that it lacks the legal authority to regulate digital assets untethered from an actual security offering.”

The New York Democrat said that the securities regulator has only “sent mixed messages, one after the other, not only contradicting the CFTC [Commodity Futures Trading Commission] but frequently contradicting itself.”

“When pressed about the status of ether as a security, Chair Gensler has been all over the place: yes, no, maybe so,” he said. He added that under Chair Gensler, “the SEC has not issued a single rule on crypto assets.”

He urged the SEC to base its regulatory efforts on the ruling, which he called the Torres Doctrine. He asked the SEC to offer clear guidance to the crypto industry and stop “making up the law as it goes.”

“I hope that the SEC will find itself so chastened by the court’s decision that it will concentrate the Commission’s enforcement energies where it belongs: on the bonafide bad actors who perpetrate serious transgressions like fraud, market manipulation, and the misappropriation of customer funds,” he concluded in his letter.

The Congressman has been criticizing the SEC’s approach to regulating the crypto space for a long while. Last week, he wrote a letter calling for an investigation into the Commission’s “haphazard and heavy-handed approach’’ to regulating the crypto industry.

In the letter to SEC’s Inspector General Deborah Jeffrey and the Government Accountability Office’s Comptroller, Torres said the SEC lacked clarity in its regulatory efforts, adding, “Clarity is the cornerstone of compliance. Yet the SEC refuses to bring even the barest amount of clarity to the application of securities law to digital assets.’’

SEC Role in Crypto Regulation

Torres’ call has been supported by some other stakeholders in the crypto industry, as well as lawmakers. Congressman Warren Davidson tweeted his support, saying, “I join my colleague in calling for Gary Gensler to embrace a different approach.”

He also argued that the Ripple case should make clear that Congress needs to provide clarity that is lacking for investors, innovators, regulators, and even the courts.

All Judge Torres did, was apply the current law as it stands to crypto assets, needless to say, the @SECGov has interpreted the law incorrectly, it’s up to the legislators and lawmakers to fix it rather than the typical scapegoat pathway of atonement, there are plenty of examples…

— Daniel Benincasa (@DanielBenincas2) July 18, 2023