Senator Cynthia Lummis Slams SEC, Calls for Regulatory Overhaul

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Wyoming Senator Cynthia Lummis, a long-time advocate for digital assets, has openly criticized the U.S. Securities and Exchange Commission (SEC) for its handling of cryptocurrency regulation.

During a recent CNBC interview on Squawk Box, Lummis pointedly called out SEC Chair Gary Gensler for his enforcement-heavy strategy, stating that his approach is stifling innovation and creating legal uncertainty for many companies in the crypto space.

Lummis on Lack of Clear Regulations

Lummis argued that the SEC’s reliance on enforcement actions rather than clear, proactive guidance has caused significant confusion for digital asset firms. As a result, many companies find themselves caught in prolonged legal battles, stalling progress in a rapidly evolving industry.

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Lummis explained that without clear regulatory frameworks, the U.S. risks falling behind global competitors like the European Union, which implemented comprehensive crypto regulations in 2023.

Question on SEC’s Crypto Stance

She further argued that the SEC’s current stance on digital assets does not align with the unique nature of decentralized cryptocurrencies such as Bitcoin and Ethereum. Lummis believes these digital currencies should fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC) rather than the SEC, which traditionally handles securities. This shift, she says, would better reflect the characteristics of decentralized assets and provide more tailored oversight for the crypto sector.

Lummis also pointed to the outdated nature of the legal tests used by the SEC, such as the Howey Test, to determine whether certain cryptocurrencies should be classified as securities. With the fast-paced advancements in blockchain technology, Lummis suggested that these legal frameworks are no longer adequate and require updates to suit the current digital asset landscape.

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Gensler Defends

In contrast, SEC Chair Gary Gensler defends his agency’s approach, arguing that regulations are already in place. In response to widespread industry criticism, Gensler remarked, “Not liking the rules is not the same as there being no rules,” noting that the SEC’s primary focus remains investor protection.

Gensler has been consistent in classifying Bitcoin as a commodity, but his stance on Ethereum remains less clear, despite Ethereum-based Exchange-Traded Funds (ETFs) receiving regulatory approval earlier this year.

Call for Legislative Changes

Looking ahead, Lummis and other lawmakers have proposed legislative changes, including a bipartisan effort with Senator Kirsten Gillibrand to update crypto taxation and funding frameworks for the CFTC. Lummis hopes that this move will provide the necessary clarity for crypto firms while ensuring the U.S. remains competitive in the global financial services industry.

In August, Lummis proposed a bill to establish a reserve Bitcoin fund for the United States government. This bill garnered massive public support, evidenced by the fact that over 2,200 letters were sent to U.S. senators within just 48 hours.