U.S. Congressman Brad Sherman has urged the U.S. Securities and Exchange Commission (SEC) to go after major cryptocurrency exchanges that traded xrp, which the regulator deems a security. “It’s easier to go after the small fish than the big fish, but the big fish operating major exchanges did many, many tens of thousands of transactions with xrp,” said the lawmaker.
US Lawmaker Urges SEC to Focus on Major Crypto Exchanges
Congressman Brad Sherman (D-CA), chairman of the House Financial Services Subcommittee on Investor Protection, held a hearing Wednesday to examine the efforts by the U.S. Securities and Exchange Commission (SEC) to address emerging risks and to protect investors.
During the hearing, Sherman, who is a senior member of the Foreign Affairs Committee, questioned SEC Director of Enforcement Gurbir Grewal regarding XRP and tether.
The congressman told Grewal: “You’ve gone after XRP because XRP is a security. But you haven’t gone after all the major crypto exchanges that processed tens of thousands, if not far more, [XRP] transactions.” He stressed:
If XRP is a security, and you think it is, and I think it is, why are these crypto exchanges not in violation of law?
He continued: “And, is it enough that the crypto exchanges have said, ‘well having committed tens of thousands of violations in the past, we promise not to do anymore in the future.’ Is that enough to get you off the hook for enforcement?”
The SEC director replied: “I can’t talk about what matter we are looking at and not looking at. We have brought exchange cases, we brought one last year against Poloniex.”
Sherman responded:
It’s easier to go after the small fish than the big fish, but the big fish operating major exchanges did many, many tens of thousands of transactions with XRP.
He added: “You know it’s a security. That means they were illegally operating a security exchange. They know it’s illegal because they stopped doing it, even though it was profitable. So if they know it’s illegal and you know it’s illegal and I know it’s illegal, I hope you focus on that.”
Turning his attention to stablecoin tether (USDT), Sherman said, “And then finally we have tether, which is a money market mutual fund in every way.” He noted that recently USDT “broke the buck.”
The congressman from California asked the SEC director:
Can you tell us why you went after terra but not tether?
Grewal replied: “It would be inappropriate for me to comment on who we are going after and not going after. But I understand your concerns and we’ve added resources to our crypto asset unit to look at issues that put investors at risk, including the issues you’ve raised in your question.”
The SEC is investigating terrausd (UST), the algorithmic stablecoin that collapsed in May along with cryptocurrency terra (LUNA). Following the implosion of the two coins, SEC Chairman Gary Gensler warned that a lot of crypto tokens will fail.
In conclusion, Sherman told Grewal: “You’ve to take on some cases that you’re not certain of winning.”
In December 2020, the SEC charged Ripple Labs and its two top executives — CEO Brad Garlinghouse and co-founder Chris Larsen — with conducting $1.3 billion of XRP, which the regulator said was an “unregistered securities offering.” Following the lawsuit announcement, crypto exchanges in the U.S. began delisting XRP, including the Nasdaq-listed crypto exchange Coinbase.
Responding to Sherman’s statements, many people on Twitter were quick to point out that no country, including the U.S., has determined that XRP is a security. Stuart Alderoty, general counsel for Ripple, tweeted Wednesday:
When elected officials don’t understand that the mere filing of a case by the SEC doesn’t determine anything … it’s more than concerning … Only the court can make a determination (it’s called due process).
During Wednesday’s hearing, Congressman Tom Emmer (R-MN) also criticized the SEC’s approach to regulating the crypto industry. “It seems clear to everyone, except maybe those at the Commission, that the SEC is not regulating in good faith,” he said.
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