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U.S. congressmen appeal to SEC arguing its crypto regulation is ‘stifling innovation’

Eight members of the United States Congress have written to the country’s Securities and Exchange Commission (SEC), regarding the agency’s information-seeking process where crypto startups are concerned.

Representatives Tom Emmer, Darren Soto, Warren Davidson, Jake Auchincloss, Byron Donalds, Josh Gottheimer, Ted Budd, and Ritchie Torres are all signatories of the bipartisan letter sent on March 16 and addressed to the SEC Chair Gary Gensler, as tweeted on Wednesday by Mr. Emmer:

According to Rep. Emmer, the decision to reach out to the SEC was the result of “numerous tips from crypto and blockchain firms that SEC Chair Gary Gensler’s information reporting “requests” to the crypto community are overburdensome, don’t feel particularly…voluntary… and are stifling innovation.”

In the series of tweets, he asserted that:

“While the SEC has authority to obtain info from market participants for rulemaking purposes, it must ensure that these inquiries don’t infringe on the standards established in the Paperwork Reduction Act, which limits the burden the govt. imposes on private businesses & citizens.”

Mr. Emmer added that “crypto startups must not be weighed down by extra-jurisdictional and burdensome reporting requirements,” promising to “ensure our regulators do not kill American innovation and opportunities.”

What does the letter say?

Among other things, the congressmen’s letter reads that:

“It appears that 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 connection with the above statement, the congressmen posed a series of questions to “understand how and why the SEC is soliciting information from private firms related to cryptocurrency and blockchain.”

The questions relate to such matters as the number of voluntary document requests issued to these firms and individuals, their average timeline to respond, the expected compliance costs and fairness analysis, and possible penalties for not responding – just to name a few.

Elsewhere, the agency has made numerous headlines over the past couple of months due to its ongoing litigation against Ripple Labs Inc, a blockchain payment company that is accused of selling more than $1.3 billion in unregistered XRP tokens between 2013 and December 2020.

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