Patrick McHenry Accuses Gensler of Misleading Congress on Ethereum Classification

May. 2, 2024
Patrick McHenry Accuses Gensler of Misleading Congress on Ethereum Classification

House Financial Services Committee Chair Patrick McHenry criticized United States Securities and Exchange Commission (SEC) Chair Gary Gensler on April 30, alleging that Gensler misled Congress about the classification of Ethereum (ETH) during his testimony to the Financial Services Committee last April.

McHenry’s allegation comes just a day after unredacted court documents filed by Consensys Software Inc. in its case against the SEC revealed that Gensler and the agency appeared to consider Ethereum security for over a year.

The Consensys filing shows that the SEC’s Director of Enforcement, Gurbir S. Grewal, initiated an investigation on March 28 of last year into the “possible offers and sales, since at least 2018, of ‘certain securities, including, but not limited to ETH.'”

On April 18, 2023, Gensler evaded questions from U.S. lawmakers about whether Ethereum could be classified as a security. McHenry stated that new court filings show this was an intentional attempt to misrepresent the Commission’s position.

“Classifying Ether as a security contradicts previous statements of the SEC and Chair Gensler – yet another example of the arbitrary and capricious nature of the agency’s regulation by enforcement approach to digital assets.”

Moreover, Crypto community members replied to McHenry on social media, expressing frustration over congressional inaction regarding the SEC’s handling of cryptocurrency regulation. “Good work! I’m sure Gensler is shaking in his boots knowing another strongly worded letter may be coming his way,” one user wrote.

“Words, words, words, when will Gary be held accountable for my (our) losses?” another said.

The SEC Criticized Over FIT21 Push

The SEC has been criticized for its regulatory approach to crypto. It sent a Wells notice to Consensys earlier this month, warning the Ethereum developer of an upcoming enforcement action. Consensys responded with litigation, citing the SEC’s regulatory overreach. In the lawsuit, Consensys stated,

“The U.S. Securities and Exchange Commission (the “SEC” or the “Commission”) seeks to regulate Ethereum as a security, even though Ethereum bears none of the attributes of a security—and even though the SEC has previously told the world that Ethereum is not a security and not within the SEC’s statutory jurisdiction.”

McHenry used his statement condemning Gensler to further advocate for the Financial Innovation for Technology for the 21st Century Act (FIT21). This legislation, introduced by House Republicans last summer, aims to address financial innovation in the 21st century.

If approved, FIT21 would establish a regulatory framework for players in the crypto industry. This could potentially ward off additional enforcement actions by the SEC. SEC.

Related Reading | Spot Bitcoin and Ethereum ETFs Commence Trading in Hong Kong

Rida Fatima

News writer
An ardent wordsmith with a rich five-year background in delving into the realms of finance and cryptocurrencies. Alongside curating captivating blogs, Unique's talents extend to crafting imaginative and engaging content.