To ensure transparency and accountability, a bipartisan contingent of federal lawmakers earlier this week requested that the Securities and Exchange Commission (SEC) detail its information-seeking requests to private cryptocurrency and blockchain firms.
“Crypto startups must not be weighed down by extra-jurisdictional and burdensome reporting requirements,” said U.S. Rep. Tom Emmer (R-MN), who earlier this week led a bipartisan group of seven other members in requesting clarity from SEC Chairman Gary Gensler on the SEC’s information-seeking process.
Emmer and his colleagues sent a March 16 letter to Gensler asking that he provide them with details about the frequency and manner of its voluntary document requests to private, non-SEC regulated crypto and blockchain firms.
“We have questions regarding the SEC’s utilization of Division of Enforcement and Division of Examination authorities to obtain information related to cryptocurrency and blockchain firms,” according to the letter, which was also signed by U.S. Reps. Darren Soto (D-FL), Warren Davidson (R-OH), Jake Auchincloss (D-MA), Byron Donalds (R-FL), Josh Gottheimer (D-NJ), Ritchie Torres (D-NY), and Ted Budd (R-NC).
The manual for the Division of Enforcement permits the SEC division to request the voluntary production of documents, the voluntary creation of documents, and voluntary interviews and testimonies from regulated entities, according to Emmer’s office, while the SEC’s Division of Examination also may submit requests for voluntary document production.
However, the SEC has extended these requests to gather information on companies not under their jurisdiction, according to their letter.
In fact, the lawmakers wrote that there appears to be a recent trend in which the SEC employs the enforcement division’s investigative functions to gather information from unregulated cryptocurrency and blockchain industry participants in a manner that’s inconsistent with the commission’s standards for initiating investigations.
“Those authorities are better suited to the SEC’s divisions charged with seeking public commentary as part of the rulemaking process,” wrote the congressional members.
To better understand how and why the SEC is soliciting information from private firms related to cryptocurrency and blockchain, the members asked Gensler to answer numerous questions by April 29.
For example, they want to know how many voluntary document requests the SEC has sent over the last five years to individuals, project teams, entities, or others regarding activities related to cryptocurrency, digital assets, or other uses of blockchain technology.
The lawmakers also requested year-by-year breakdowns of what the expected compliance costs are for such entities to respond to the SEC’s voluntary document requests, as well as whether the SEC has conducted a cost-benefit analysis to determine the fairness and efficacy of its requests, among several other questions.
“Your response will help provide us with a better understanding of the SEC’s authority to secure the information and transparency it feels it requires while also ensuring these types of requests are not overburdensome, unnecessary, and do not stifle innovation,” the members wrote.