Senator Pat Tomey is well-known for his support of the crypto industry. The United States Securities and Exchange Commission could have prevented the $12 billion loss in assets from investors who trusted Celsius (a crypto lending platform) that frozen their deposits in June.
Toomey’s July 26 letter to Gary Gensler (SEC Chairman), suggested that the Commission’s inability clarify how it would apply securities laws to digital assets or services led to unwelcome consequences. Toomey wrote:
“Companies could have changed product offerings to prevent investor losses, and the SEC wouldn’t have had to concentrate its enforcement efforts on the worst offenders.”
Toomey claims that the SEC did not properly explain how the Howey or Reves tests were applied to crypto lending platforms products that paid interest to customers who made crypto deposits. He emphasized that the SEC prefers to regulate through selective enforcement.
The senator spoke out about the Coinbase insider trading accusations against a former employee. He claimed that although the SEC had a clear view on the securities’ status, it didn’t make that public before launching enforcement actions.
Starting from a dubious presupposition that most digital assets are securities, he notes, the SEC both makes it difficult for well-intentioned companies to comply and doesn’t serve great protection for customers with its regulation-by-enforcement style.
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According to Toomey, this combination of the SEC’s refusal to provide regulatory clarity to crypto communities and “an apparently slow enforcement pace” is detrimental to investors and innovation in general.
Toomey asks Gensler nine questions and requests a response by August 9. They include a request to publicly identify other large crypto lending companies that are not registered under the SEC. Also, explain why the Commission did not include 16 of the 25 digital assets trades by the Coinbase employee in its charges.
Toomey announced his support for the Stablecoin Innovation and Protection Act on May 10. This bill would allow the Federal Deposit Insurance Corporation (FDIC) to back stablecoins in a similar way to fiat deposits.