Crypto Advocates Call for Regulatory Clarity in Congressional Hearing

Crypto leaders called for industry-specific rulemaking in a congressional hearing a week after securities regulators cracked down on the largest digital assets exchanges.

A June 13 congressional hearing focused heavily on proposed legislation for digital assets which congressmen Patrick McHenry and Glenn Thompson introduced earlier this month.

Five witnesses attended the hearing. These included Jeremy Allaire, the CEO of Circle, which issues crypto’s second largest stablecoin USDC, Emin Gun Sirer, the CEO of Ava Labs, which fosters the growth of the Avalanche blockchain, Coy Garrison, former counsel at the SEC, Thomas Sexton, president of the National Futures Association, and Aaron Kaplan, co-founder of Prometheum, a trading platform for legally compliant security tokens.

The crux of the discussion lay on whether the digital asset space has enough regulatory clarity or if it requires a bill like McHenry and Thompson’s to establish a crypto-specific regulatory regime.

The hearing happens as the battle around regulation and enforcement of digital assets in the United States has reached a fever pitch. The SEC last week levied complaints against some of the largest crypto companies, Coinbase and Binance.

‘Sensible’ Regulations

In calling for “sensible” regulatory frameworks for both smart contracts and digital assets, Avax Labs’ Gun Sirer framed blockchains as the next iteration of the internet in his opening statement. “Blockchains represent the next phase of networked computer systems,” he said.

The overarching arguments lie in whether new legislation is necessary, and in which situations government agencies, primarily the CFTC and the SEC, should have regulatory authority.

The Thompson-McHenry bill has the potential to become a landmark piece of legislation. Gabriel Shapiro, general counsel at the crypto-focused research and development outfit, Delphi Labs, and previous guest on The Defiant podcast, called it “one of the most complex and ambitious financial laws ever written,” on Twitter.

But not all speakers were in favor of crypto-specific laws.

Existing Laws

“Those who argue for new laws are simply not willing to comply with existing applicable securities laws and regulations,” Kaplan, co-founder of SEC-compliant Prometheum, said in his opening statement. “New legislation is not in the best interest of the investing public or the blockchain industry.”

Prometheum received a first-of-its-kind approval from the Financial Industry Regulatory Authority (FINRA), which the SEC oversees, to operate a “special purpose broker-dealer,” last month.

Meanwhile, the comment period from the SEC about a proposed rulemaking closed. The rulemaking could categorize many DeFi protocols, along with a myriad of other blockchain-based entities, as exchanges.

Crypto advocacy groups like The Blockchain Association and The Defi Education Fund, were among the groups who submitted comment letters.

“Instead of crafting fit-for-purpose rules that recognize the unique nature of decentralized protocols and related entities, the SEC expands its jurisdiction beyond the limits originally set by Congress, while raising serious constitutional and APA concerns,” Kristin Smith said in a statement shared with The Defiant.

The Blockchain Association’s commentis the second filed by the organization during this comment period which began on April 14. i

The DeFi Education Fund has also filed three comments in total, including one on June 12, just before the filing period closed.

Miller Whitehouse-Levine, the CEO of the DeFi Education Fund, sees the rulemaking unequivocally. “Simply put, the proposed rulemaking makes the SEC’s position clear: centralize, shut down, or get out of the United States,” he said.