A Republican commissioner at the Securities and Exchange Commission (SEC) offered a searing critique of the agency’s work under Democratic Chair Gary Gensler on Tuesday, as Gensler defended his tenure during a joint appearance of all five commissioners before Congress.
SEC Commissioner Hester Peirce, whose name has been floated as Gensler’s potential successor under a second Trump administration, criticized the agency’s approach to digital assets and suggested that they have “fallen down on our duty as a regulator.”
“We’ve taken a legally imprecise view to mask the regulatory lack of clarity,” Peirce told the House Financial Services Committee, adding, “I think what’s happening is that we’re trying to be ambiguous because the legal precision carries with it real implications.”
Peirce’s critiques appeared largely aimed at Gensler, who was seated just feet away from the Republican commissioner and who had defended his approach to digital asset regulation moments earlier.
Gensler has long maintained that the determination of whether digital assets, like cryptocurrencies, are securities regulated by the SEC comes down to a legal framework known as the Howey Test.
He argued Tuesday that “court after court” has found that the Howey Test is “actually quite clear.”
However, the crypto industry has frequently expressed frustration with this framework, arguing that they still lack clarity on how and when to comply with the SEC’s rules in order to avoid costly enforcement actions.
Republican lawmakers, who have increasingly aligned themselves with the crypto industry, repeatedly turned to Peirce on Tuesday for rebukes of Gensler’s approach.
“It’s a very bad approach to trying to regulate an industry if you’re trying to protect investors, if you’re trying to shepherd the commission’s resources well,” Peirce said in response to questioning from Rep. French Hill (R-Ark.).
“It’s very inefficient, and at the end of the day, it leaves everyone wondering where the lines of our authority are,” she continued.
The GOP led an effort in the House to establish a new framework for digital asset regulation through the Financial Innovation and Technology of the 21st Century Act (FIT21). The bill passed the lower chamber in a 279-136 vote in May, with 71 Democrats joining 208 Republicans to support the measure.
Following FIT21’s passage, Gensler slammed the legislation, arguing that it would “create new regulatory gaps and undermine decades of precedent.”
While Peirce said Tuesday that “it’s always helpful to have Congress weigh in,” she also suggested that it is within the SEC’s authority to provide guidelines that it has so far “chosen not to provide.”
Despite the divisions within the agency on display Tuesday, there were moments of camaraderie between the commissioners.
“We get along very well as a commission; we work very well as a commission,” Peirce said, adding, “We do have tremendous capital markets in the U.S., and we really need to preserve them. And that’s what we’re all fighting to do.”
“I want to augment something by fellow commissioner said – I think we all five do get on pretty well,” Gensler later said. “We have policy differences, but that’s by design. Congress wanted this to be a robust policy debate … I really do believe in the give-and-take that we have.”