Congressmen Warn Gary Gensler That the Newly Proposed SEC Rule Would “Stifle Innovation” 

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Key Takeaways:

  • Two sitting Congressmen wrote a letter to the SEC regarding the changes offered by the latter.
  • The former will await a response before May 18. 

Regulations about the digital assets market have always been a topic of debate. Recently, two congressmen have raised their concerns about the changes proposed by the SEC earlier this year. 

On January 26, 2022, the Securities and Exchange Commission proposed expanding the already existing definition of ‘exchange’. The previous definition is mentioned in the Securities Exchange Act of 1934. It reads as “any organization, association, or group of persons, whether incorporated or unincorporated, which constitutes, maintains, or provides a marketplace or facilities for bringing together purchasers and sellers of securities or for otherwise performing with respect to securities the functions commonly performed by a stock exchange as that term is generally understood and includes the market place, and the market facilities maintained such exchange.” 

The new definition proposed asks to include “Communications Protocol Systems,” which will cross the borders of the SEC’s “statutory authority”. 

Another similar change has been proposed by the SEC to redefine ” as a part of a regular business”. But the most concerning of all is a footnote provided by the SEC that says that no additional information or “related cost-benefit analysis” would be required for digital assets to be considered as securities. 

The changes proposed by the SEC are not well received by the Congressmen as they lack proper justifications. Therefore, the letter states, “Regulators as well as Congress must approach this technology with a balanced approach, that allows the ecosystem to reach its full potential while simultaneously protecting market participants.” The Congressmen are expecting a reply from the SEC regarding the matters highlighted in the letter before May 18, 2022. 

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Shreya Bhattacharya
Shreya Bhattacharya

A journalist & writer exploring new topics every day!

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