A Republican lawmaker leading a House subcommittee overseeing digital assets has strongly criticized the United States Securities and Exchange Commission (SEC) and its chair, Gary Gensler, for what he perceives as injecting politics into the regulation of crypto firms. During a hearing on September 18 of the House Subcommittee on Digital Assets, Financial Technology, and Inclusion, Arkansas Representative French Hill accused Chair Gensler of causing “confusion and uncertainty” in the markets with his approach to digital assets.

The hearing, titled “Dazed and Confused: Breaking Down the SEC’s Politicized Approach to Digital Assets,” saw Rep. Hill propose alternative regulatory paths for crypto, such as the Financial Innovation and Technology for the 21st Century (FIT21) Act currently making its way through Congress. He emphasized that supporting FIT21 and a regulatory framework does not mean they are against the SEC going after bad actors or updating rules to include digital asset securities.

Rep. Hill stated, “We’re against SEC enforcement abuse and making it difficult for legitimate actors who are trying to comply with the rules to innovate and bring technology to our markets.” This sentiment was echoed by former SEC commissioner Dan Gallagher and former acting enforcement chief Michael Liftik, who testified at the hearing and called for Congress to intervene with legislation to address the SEC’s “regulation by enforcement” approach to crypto.

However, Subcommittee ranking member Stephen Lynch, a Democrat, pushed back against claims of politicization at the SEC, pointing to the millions of dollars from the crypto industry being used to support or oppose candidates in the upcoming congressional elections in 2024. Rep. Lynch suggested that the industry was orchestrating resistance to crypto regulation in Congress and accused them of playing politics.

Rep. Lynch also highlighted the collapse of most of the digital asset space and claimed that what remains is often used for illicit finance or illegal activities. He criticized the focus on legislation governing a small portion of the financial sector instead of recognizing the potential benefits of the technology. North Carolina Representative Wiley Nickel, a Democrat and vocal advocate for digital assets, also criticized Gensler’s approach as “politicized” and “wrong.”

The hearing took place just 48 days before the US Election, with the leadership of the House Financial Services Committee and the digital assets subcommittee potentially shifting between Republicans and Democrats in 2025 depending on the election outcome. The clash between lawmakers and the SEC over the regulation of crypto firms highlights the ongoing debate surrounding the role of politics in shaping the future of digital assets in the United States.