Unpacking Gary Gensler’s SEC Testimony: Crypto Controversies and Custody Questions

Gensler in the Hot Seat

On September 27, Gary Gensler, the SEC chair, faced a marathon session before the House Financial Services Committee. It was more than four hours of rigorous questioning—akin to a game show with skeptical judges and Gensler as the perplexed contestant trying to avoid the trap doors. Spoiler alert: no one won a car.

SAB 121: What’s Cooking?

A significant portion of the session revolved around the much-debated Staff Accounting Bulletin (SAB) 121, which provides guidance on how public companies should handle digital assets in custody. Representative Mike Flood didn’t pull any punches when he confronted Gensler about this bulletin, reminding him that the SEC didn’t consult with prudential regulators before its release. It’s like throwing a dinner party and not inviting the chef—totally awkward!

The Missing Framework

Flood highlighted that the Financial Accounting Standards Board (FASB), the body that usually oversees accounting standards, hadn’t even dabbled with digital asset custody before SAB 121 rolled out. Talk about jumping the gun! Flood’s conclusion was hard-hitting: either the SEC knew they were shooting in the dark with the bulletin or it was just a huge blunder. And let’s just say, nobody wants to be the person who serves burnt toast at the dinner party.

Resistance from the Ranks

The SAB was met with skepticism right from the get-go. SEC Commissioner Hester Peirce openly criticized the issuance, arguing that it felt less like guidance and more like an overreach of regulation dressed up in a corporate suit. Five senators later chimed in, suggesting that the bulletin was akin to wearing a disguise that didn’t quite fit. It’s all fun and games until someone brings out the regulatory cape.

Bitcoin ETFs Still in Limbo

Speaking of capes, during the hearing, committee members pushed Gensler on approving spot Bitcoin exchange-traded funds (ETFs). Emmer accused Gensler of bias, while Davidson worried if the SEC was going to prioritize applications fairly after Grayscale’s recent win against the SEC. Gensler’s response? “We’re still considering”— not exactly a warm hug of reassurance.

Key Takeaways

• Gensler testified for over 4 hours, facing serious queries on SEC policies.
• SAB 121 was criticized for lack of foundational support and regulatory consultation.
• The SEC is currently navigating the stormy seas of Bitcoin ETF applications.