House Republicans are calling for the withdrawal of a proposed rule by the Securities and Exchange Commission (SEC), asserting that it would stifle the growth of the digital asset industry. In a letter addressed to the SEC, a group of House Financial Services Committee lawmakers expressed concerns about the rule’s potential impact, arguing that it could broaden the definition of an exchange to encompass “communication protocol systems” and extend its reach beyond centralized exchanges.
The lawmakers contended that the rule, if implemented, would extend its regulatory scope to individuals “acting ‘in concert'” in the digital asset ecosystem, including software developers and participants in a blockchain network’s consensus mechanism. They also highlighted the likelihood of the rule affecting software developers and those involved in a blockchain network’s consensus mechanism.
The letter received support from nearly 30 lawmakers, including Patrick T. McHenry, House Financial Services Committee Chair, French Hill, Tom Emmer, and Warren Davidson. Moreover, the lawmakers accused SEC Chair Gary Gensler of leveraging the proposal to advance his personal opinions on digital assets. They cited Gensler’s past assertions equating decentralized finance (DeFi) exchanges to traditional intermediaries in financial markets, despite the former’s distinctive nature.
Additionally, the lawmakers accused the SEC of preempting Congress by proposing regulations while the House Agriculture Committee they are working on legislation to oversee digital assets. Both committees’ leaders have released preliminary drafts of regulatory measures, including provisions that would classify cryptocurrencies as securities or commodities and introduce regulations for exchanges, among other aspects.
McHenry expressed his intention to hold a vote on the bill by mid-July, emphasizing that it is still in its draft stage. He noted ample time for members to find common ground and shape the legislation during the committee’s post-July 4 recess.
House Republicans are raising concerns about the proposed SEC rule, urging its withdrawal to avoid hindering the development of the digital asset industry. They believe that the rule’s broad scope and potential implications on various stakeholders, including software developers and participants in blockchain networks, warrant further consideration and alignment with forthcoming legislation proposed by the House Financial Services Committee and the House Agriculture Committee.