McHenry Accuses SEC of Misleading Congress

Patrick McHenry, Chairman of the House Financial Services Committee, entered the ongoing discord between financial regulators and the cryptocurrency industry. He accused SEC Chair Gary Gensler of misleading Congress about the agency’s position on Ethereum.

This accusation follows revelations that the SEC had internally categorized Ethereum (ETH) as an unregistered security for over a year. These details emerged from unredacted sections of a lawsuit filed against the regulator by Ethereum software company Consensys.

During a congressional hearing on April 18 last year, Gensler repeatedly sidestepped inquiries about the SEC’s stance on Ethereum, which ranks just below Bitcoin in terms of market capitalization. McHenry’s probing questions aimed to clarify this position, but Gensler avoided direct responses.

A lawsuit by Consensys unveiled that just five days prior to this hearing, on April 13, the SEC had approved a formal order allowing agency staff to issue subpoenas concerning the offer and sale of various crypto assets, including Ethereum.

“New evidence shows Chair Gensler himself misled Congress,” McHenry stated, referring to Gensler’s testimony last year. “New court filings show this was an intentional attempt to misrepresent the Commission’s position.”

It is important to note, however, that such formal orders from the SEC do not typically signify a legal conclusion; they are generally initial steps in an investigation process, as explained by a source familiar with the matter.

McHenry further criticized the SEC’s approach to Ethereum as showcasing the “arbitrary and capricious nature of the agency’s regulation by enforcement approach to digital assets.”

In response to these developments, McHenry’s office announced a forthcoming hearing titled “SEC Enforcement: Balancing Deterrence with Due Process.” This session is scheduled for next week and will be conducted by the Financial Services Committee’s Subcommittee on Capital Markets.

The ongoing dispute highlights significant tensions between the cryptocurrency industry and financial regulators, reflecting the complex and evolving nature of digital asset regulation.