All Republican members of the U.S. House Financial Services Committee, led by Chairman McHenry, sent a letter to the SEC requesting that the SEC rescind its rulemaking on the definition of "exchange.
The lawmakers emphasized that the SEC exceeded its statutory authority by attempting to expand the definition of an exchange to include "communication protocol systems. The proposed rule would stifle technological innovation, harm digital asset market participants and the U.S. economy, and run counter to the SEC's mission of protecting investors and promoting capital.
The letter states, "The Proposed Rule significantly expands the definition of exchange in the Exchange Act to include systems that 'bring […] together buyers and sellers of securities using trading interest' and 'make […] available [communication protocols] under which buyers and sellers can interact and agree to the terms of a trade.' For digital assets, the Proposed Rule would go well beyond regulating centralized digital asset platforms and apply to persons acting ‘in concert’ with each other. This could capture a wide range of individuals in the digital asset ecosystem, including software developers and participants in a blockchain network’s consensus mechanism.
They said, "Given the goals of this Proposed Rule, it is clear that Chair Gensler is using this proposal to push his own personal views regarding digital assets." Chair Gensler has previously made statements on his own behalf claiming that DeFi exchanges are essentially equivalent to traditional intermediaries in financial markets even if they call themselves something different. He has also appeared before this Committee, testifying that 'given that most crypto tokens are securities, it follows that many crypto intermediaries are transacting in securities and have to register with the SEC.' It appears this Proposed Rule is an attempt to assert this personal view as official SEC policy without adequate analysis or justification.
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