In a surprising turn of events, two prominent US senators have come forward to criticize the Securities and Exchange Commission (SEC) for its recent lawsuit against Coinbase, the largest American cryptocurrency exchange. The senators, Cynthia Lummis and Bill Hagerty argue that the SEC’s regulatory approach harms consumers and stifles innovation in the crypto industry.
The SEC filed a lawsuit on June 6, accusing Coinbase of violating securities laws by operating as an unregistered broker, exchange, and clearing agency. The regulator also claimed that the exchange offered unregistered securities through its Staking Program, including tokens like Cardano (ADA) and Solana (SOL), without proper registration.
However, Senator Lummis believes that the SEC’s “regulation by enforcement” approach is misguided and fails to provide a favorable regulatory environment for digital asset exchanges to comply with.
Senator Lummis emphasized the importance of creating a robust legal framework that allows exchanges to operate within the law, rather than driving the industry offshore or underground. To address this issue, she called for the passage of the Lummis-Gillibrand Responsible Financial Innovation Act, a bill she co-authored with Senator Kirsten Gillibrand, which aims to provide regulatory clarity for the emerging crypto space.
Senator Hagerty echoed Lummis’ concerns, accusing the SEC of weaponizing its role to kill the crypto industry. He criticized the regulator’s refusal to allow Coinbase to register, despite approving its public listing, calling it indefensible. Hagerty also warned that the Gensler-led SEC would face scrutiny from Congress over its actions.
This is not the first time Senator Hagerty has expressed discontent with financial regulators. In a letter sent on March 9, he questioned why these agencies were pressuring financial institutions to sever ties with licensed and legally operating cryptocurrency companies.
His stance reflects a growing sentiment among lawmakers that the regulatory landscape surrounding digital assets must be clarified and more accommodating to foster innovation and protect consumers.
The criticism from Senators Lummis and Hagerty highlights a growing divide between regulators and lawmakers regarding the approach to cryptocurrency regulation. While the SEC under Chair Gary Gensler has been urging crypto firms to register, these senators argue that the lack of clear guidance and a supportive regulatory environment has hindered the industry’s growth and forced it into uncertain territory.
As the debate over cryptocurrency regulation continues, it remains to be seen how Congress and the SEC will address these concerns and work towards creating a regulatory framework that balances consumer protection and fostering innovation in the rapidly evolving world of digital assets.