Democrats, Republicans clash over SEC role in House hearing

Democrats and Republicans clashed over how the Securities and Exchange Commission is handling crypto enforcement actions during a House Financial Services subcommittee hearing Tuesday. 

Capital Markets Subcommittee Chair Ann Wagner, R-Mo., kicked off the hearing titled “SEC enforcement: balancing deterrence with due process,” with a jab at the securities regulator, mentioning the recent sanctions the SEC received in its case against Debt Box. 

“Public trust in the SEC will only decline when its employees are sanctioned and forced to resign for their quote gross abuse of power, as they were in the recent case against the crypto platform known as Debt Box,” Wagner said. 

Read more: SEC’s Gensler calls for more crypto disclosures for investors

Rep. Brad Sherman, D-Cali., was quick to counter Wagner’s point, arguing that the agency handled the misconduct appropriately . 

“There were two SEC lawyers who acted wrongfully in the Debt Box case,” Sherman said. “They’ve been fired, and I think that sets an example that will assure that other SEC lawyers do not act similarly.” 

Rep. Maxine Waters, D-Cali., a typical vocal opponent of the crypto industry alongside Sherman, took a partisan stance, asserting that her side of the aisle is the only one looking out for constituents. 

“My message to the crypto industry and everyone else: Democrats will always press for compliance, investor protection and market integrity,” Waters said. 

The hearing comes a day after the House Committee on Rules moved to advance a joint resolution that would overturn the SEC’s Staff Accounting Bill (SAB) 121, a controversial advisory that states digital asset custodians should report a liability and “corresponding assets” on their balance sheets for all cryptocurrencies under custody.

Committee members Mike Flood, R-Neb., and Wiley Nickel, D-N.C., introduced the resolution earlier this month alongside a similar measure in the Senate spearheaded by Cynthia Lummis, R-Wyom. The legislators cited a report from the Government Accountability Office, which stated in an October 2023 report that SAB 121 should have been issued as a rule under the official process. 

“It is unfortunate that the SEC would attempt to circumvent the rulemaking process while falsely claiming that SAB 121 is simply non-binding staff-level guidance,” Flood said Monday during testimony before the Rules Committee. 

The resolution heads to the House floor Wednesday for debate. Waters argued Tuesday that this “attempt to kill SAB 121” is unnecessary and prevents the SEC from carrying out its rightful duties.

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