A group of crypto companies has complained about the U.S. Securities and Exchange Commission’s (SEC) “overburdensome” reporting requests. Via his personal Twitter account, U.S. Congressman Tom Emmer reported “numerous tips” possibly confirming this situation.
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The U.S. government official said the request “don’t feel particularly voluntary” and expressed concerns about a potential impact on the crypto industry and its capacity to innovate. Emmer sent a letter to SEC Chair Gary Gensler today March 16, to demand more information.
The document was co-signed by U.S. Congressmen Darren Soto, Warren Davison, Jake Auchincloss, Byron Donalds, Josh Gottheimer, Ted Budd, and Ritchie Torres. The letter claims the regulator has been using the Division of Enforcement and Division of Examination authorities to gather information related to crypto companies.
The U.S. government officials believe the regulator has been misusing this division and informed the SEC about its limitation “to the extent of its statutorily mandated jurisdiction”. The documents expand on this idea with the following:
It appears there has been a recent trend towards employing the Enforcement Division’s investigative functions to gather information from unregulated cryptocurrency and blockchain industry participants in a manner inconsistent with the Commission’s standards for initiating investigations.
In that sense, the Congressmen believe the SEC could be at odds with the Paperwork Reduction Act (PRA), enacted in 1980. This act regulates and aims to reduce the amount of paperwork a person or private entity needs to provide to a federal agency.
The SEC could be asking crypto entities to provide information “voluntary”, as it launches the initial phase of an investigation. However, the government officials put this “voluntary” nature into question, as mentioned, and could be becoming a burden for the companies´ time. The letter claims:
Pursuant to the PRA, in seeking information from the American public, federal agencies must be good stewards of the public’s time, and not overwhelm them with unnecessary or duplicative requests for information.
My office has received numerous tips from crypto and blockchain firms that SEC Chair @GaryGensler’s information reporting “requests” to the crypto community are overburdensome, don’t feel particularly… voluntary… and are stifling innovation.
— Tom Emmer (@RepTomEmmer) March 16, 2022
What The SEC Could Reply, And Its Impact In Crypto
The Congressmen provide the Commission with a list of 13 questions to apparently understand the reports on potential regulatory overreach. Mostly, the questions are centered around the amount of information the SEC has requested from “Relevant Entities”, and its potential compliance cost for crypto companies.
The government officials also demand the regulator more information on potential sanctions imposed on non-respondent companies, and about potential investigations noticed by these entities. Commenting on this event, lawyer Collins Belton praised the lobby of digital asset defenders in Washington.
He believes the letters and the potential reply from the SEC “will not paint the commission in a good light”. In that sense, he believes this bipartisan action from the U.S. Congressmen could have positive implications and could shed light on the amplitude of the SEC requests.
Belton added the following on how the SEC could be overstepping its reach and its impact on crypto companies:
If you’re lucky, you only have to respond once. But if you have to go back and forth (or hell, even if you just have a complex product) many will easily break $25-50K at a biglaw firm from what I know from experience and anecdotally.
General Counsel at Delphi Digital Labs Gabriel Shapiro replied to Belton and agreed with most of his take. However, he believes the request will fail to expose the SEC’s practices. He said:
I agree with everything you’re saying in this thread except the idea that the commission’s replies will somehow expose its bad practices. The commission will just respond that they don’t have this information / track this data and will otherwise give very vague replies.
At the time of writing, Bitcoin (BTC) trades to the upside at $41,200 with a 4.5% profit in the last 24-hours.