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Senator Pat Tomey, who is known for his strong support of the cryptocurrency industry, says that the United States Securities and Exchange Commission (SEC) could have stopped investors from losing $12 billion in assets when the crypto lending platform Celsius froze their deposits in June.
In a July 26 letter to SEC Chairman Gary Gensler, Toomey said that the Commission's inability to explain how it would apply existing securities laws to digital assets and services could lead to bad things. According to what Toomey writes:
"Companies could have changed their products in response, which would have kept investors from losing money, and the SEC would have been free to focus on the worst actors."
Toomey says that the SEC didn't do a good job of explaining how the Howey and Reves tests applied to crypto lending platform products that paid customers who deposited crypto interest. Instead, he said, the SEC is choosing to regulate by picking and choosing which rules to follow.
The senator brought up the recent insider trading charges against a former Coinbase employee. He said that the SEC had a clear opinion on whether these assets were securities or not, but it didn't share that opinion with the public before taking action.
Starting from the questionable idea that most digital assets are securities, he says, the SEC's way of regulating by enforcement makes it hard for good companies to follow the rules and doesn't do much to protect customers.
Toomey says that because of this, the SEC's continued refusal to give the crypto community clear rules and "an apparently slow enforcement pace" hurt investors and innovation in general.
In the end, Toomey asks Gensler nine questions and asks him to answer by August 9. Among them are proposals to make public the names of other big crypto lending companies that aren't registered with the SEC and to explain why the Commission hasn't charged the Coinbase worker for 16 of the 25 digital assets he or she traded.
On May 10, Toomey said he supported the Stablecoin Innovation and Protection Act, which would let the Federal Deposit Insurance Corporation back stablecoins in the same way it backs fiat deposits.
