On September 24, 2019, The House Financial Services Committee (HFSC) conducted a hearing named “Oversight of the Securities And Exchange Commission: Wall Street’s Cop On The Beat.” This hearing provided a good opportunity for the five commissioners of the Securities and Exchanges Commission (SEC) to have a public meeting while also appearing as witnesses before the Committee in the House of Representatives. The Democrats thereby got an opportune moment to have a discussion on Facebook’s Libra and other digital currencies, the moot point of the discussion being how the SEC might regularize these cryptocurrencies acting almost like the “Big Tech’s Cop on the Beat.”
The SEC is an autonomous agency of the Federal Government of the United States and is entrusted with enforcement of federal securities laws, amending or passing securities laws, regulating the rules and securities industry as well as the stock exchanges. It also regulates the electronic securities market. In the hearing held last Tuesday, the chairwoman, Maxine Waters (D-CA) expressed her concerns over Facebook’s Crypto Project Libra and Calibra and remarked,
“I’m very concerned about Facebook’s plan to create a Digital currency Libra and digital wallet Calibra. It appears that Facebook is working to create a global financial system that is intended to rival the U.S. dollar…I hope to hear what steps the SEC has taken is doing to ensure that Libra is appropriately and rigorously regulated.”
Jay Clayton, the chairman of SEC responded to a query put forth by Waters on whether the SEC had some special committee or advisory group that focuses only on the Libra, to which he said that there is such a group within the SEC whose primary task is to analyze and understand the potential of crypto and other such assets and also to look at the risks that they might entail. This concern was also addressed by representative AL Green (D-TX) who added that it is the Libra Investment token that would fund the Libra coin which implies that the SEC can classify both tokens as securities. A Committee Memorandum was also provided by the HFSC just before the hearing, which was also on lines similar to Green’s remarks.
The Republicans like Congressman Warren Davidson (R-OH) and Congressman Ted Budd (R-NC) asked for greater clarity on regulation of crypto and other digital assets so that the United States can also attract innovative ideas and enterprises in this sector rather than them being driven to the UK or Singapore who provides regulatory clarity. Bill Hinman, the Director of Corporate Finance at the SEC had also said that an approach through facts and circumstances towards crypto assets remained largely insufficient in establishing regulatory clarity needed in the country, as compared to a bridge line test. Davidson said,
“ This company by company approach prevents regulatory clarity and it suffers from the charm and inefficiencies of third world power structures.”
He also added that this clarity could be found in many other countries like UK, Switzerland, and Singapore and that his country lacks one in the sphere of crypto and digital currency. Commissioner Hester Pierce also commented in this regard that a law passed by the Congress would be a better way to announce policy rather than enforcement.
As other Republicans like Congressman Gonzalez (R-OH) also raised similar concerns, Commissioner Pierce responded by saying that the new SEC framework on digital currencies was guidance that “did muddy the waters” and thus that the work of the SEC in this sector had left more to be desired. Chairman Clayton, however, assured that the token technology would be given a freeway as long as it would provide access in a secured way.