U.S. Sens. Elizabeth Warren (D-MA) and Chris Van Hollen (D-MD) expressed concerns over a recent Securities and Exchange Commission (SEC) interpretive release that grants exemptions from federal securities laws to broad categories of crypto assets.
Further, SEC Chairman Paul Atkins recently promised that further exemptions are on their way. There have been warnings from the financial industry, according to the senators, that the broad exemptive relief sought by the crypto industry could introduce potential cybersecurity risks and “harm investors.”
The senators called on Congress to close the loopholes that would allow market participants to escape the securities laws using crypto as it considers crypto market structure legislation.
“As SEC Chairman, you have made clear that you intend to provide ‘crypto innovators [with] bespoke pathways to raise capital in the U.S.’ and make America the ‘crypto capital of the world.’ It appears that you plan to work towards this goal by exempting most cryptocurrencies from the securities laws—with significant potential harm to and implications for investors and our financial markets,” the senators wrote in a letter to Atkins.
The SEC’s interpretive release divides crypto assets into five categories — digital commodities, digital collectibles, digital tools, stablecoins, and digital securities. Three of its five categories—digital commodities, digital collectibles, and digital tools – are “not themselves securities,” according to the senators. Warren and Van Hollen added that stablecoins may or may not be securities depending on their characteristics. In addition, the senators warned that provisions in the guidance could allow crypto issuers to evade securities regulation altogether, creating regulatory loopholes that bad actors could exploit.
Further, the lawmakers highlighted the potential benefits of the SEC’s interpretation to the Trump family’s crypto empire.
“Just as certainly as investors will be harmed as the Commission works to provide special treatment for crypto, the Trump family’s holdings will be boosted by these favorable regulatory developments,” wrote the senators.
The senators requested a response from the SEC to their series of questions by May 8.