May 23, 2024
McHenry Alleges Gary Gensler Misled on Ether
Latest Cryptocurrency News

McHenry Alleges Gary Gensler Misled on Ether

Patrick McHenry, Chair of the United States House Financial Services Committee, alleges that SEC Chair Gary Gensler intentionally misled Congress about classifying Ether (ETH) as a security. McHenry’s allegations stem from a recent court filing by Consensys, a software development firm that filed a lawsuit against the SEC.

Source: Representative Patrick McHenry

Inconsistencies in SEC’s Approach

Consensys’s complaint, filed in the U.S. District Court for the Northern District of Texas, highlights public inconsistencies in the SEC’s treatment of digital assets, particularly Ether. Unredacted portions of the filing, revealed on April 29, indicate that the SEC initiated an investigation into ETH as a security in March 2023. This contradicts Gensler’s testimony before the House Financial Services Committee in April 2023.

During the Committee hearing, Gary Gensler evaded direct questions from McHenry about whether Ether fell under the SEC’s jurisdiction as a security or the Commodity Futures Trading Commission’s (CFTC’s) purview as a commodity. McHenry emphasized the importance of clarity, stating, “Clearly, an asset cannot be both a commodity and a security.” The lack of clear regulatory guidance raises concerns about potential conflicts between the SEC and CFTC regarding Ether’s regulatory status.

Implications for Ether’s Regulatory Status

The regulatory uncertainty surrounding Ether’s classification has significant implications for the cryptocurrency market. If the SEC proceeds with treating Ether as a security, it could impact the approval or denial of spot Ether exchange-traded funds (ETFs) on U.S. exchanges. Despite the SEC’s approval of investment vehicles tied to ETH futures in October 2023, the decision on a spot Ether ETF remains pending.

McHenry urges lawmakers to support the passage of the Financial Innovation and Technology for the 21st Century Act (FIT21), which aims to establish clear regulatory frameworks between the SEC and CFTC. The legislation, which advanced out of Committee in July 2023, awaits a full floor vote in the House. Achieving regulatory clarity is essential for fostering innovation and ensuring investor protection in the rapidly evolving cryptocurrency landscape.

Image by Flickr

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