The course of yesterday’s congressional hearing of US Securities and Exchange Commission chairman Gary Gensler before the House Financial Services Committee can undoubtedly be seen as an indirect triumph for Ripple, XRP investors and the entire crypto industry. Gensler was confronted with tough questions right from the start, which he tremulously dodged, just to avoid giving any regulatory clarity.
Partly with shaking hands and in broken speech, Gensler only stammered in response to aggressive questions from Committee Chairman Patrick McHenry, Warren Davidson and Tom Emmer (all Republicans), among others. Davidson asked the most important question of the day for the XRP community: whether he believes XRP is a security.
Interestingly, Gensler refused to give a yes or no answer. Instead, the SEC chief said that the question of whether XRP is a security is currently in court, and that there are active discussions on the issue. “We are in court, and [there are] active discussion and litigation on that matter,” Gensler responded.
“Is ETH a Security? Is XRP a Security?”
Mr. Davidson & Gary Gensler – ENJOY!
Great direct questioning to get to the point. Once again Gary stays indecisive to keep regs indecisive. pic.twitter.com/DzVilrFlwZ
— Mrlevelup (@mrlevelup) April 18, 2023
Fair Notice Defense Of Ripple Gets Stronger
Certainly, a strong case for Ripple’s fair notice defense was made by McHenry, when he pestered the SEC chairman with numerous follow-up questions to get him to make a classification of Ethereum (ETH) as a security or commodity. The fair notice defense states that no one should be forced to “speculate on the meaning of laws.”
Gensler kept dodging the questions, while McHenry sharpened the tone. “I am asking you a specific question, chair Gary Gensler. I said this in private. This should be no shock. I am asking this question. Is Ether a commodity or security?”
Gensler responded only with, “It depends on the facts and law,” while McHenry, visibly annoyed, interrupted the SEC chairman and said, “I am asking you about the facts and the law sitting in your seat and the judgment you are making.” Gensler replied only that he can’t “prejudge.”
McHenry countered that he does exactly this with his more than 50 enforcement actions, including one against Ripple. “Do you think this provides safety and soundness, does it provide consumer protection, […] I think ‘No’ should be a very simple answer for you here. That uncertainty is bad,” Mchenry stated.
There is no way @ripple will lose. pic.twitter.com/cZgnADLYnz
— Mr. Huber🔥🦅🔥 (@Leerzeit) April 18, 2023
He also announced that it is the committee’s intention to remove the uncertainty and create a sound legal basis. All of this should play into Ripple’s cards.
With the Fair Notice, Ripple already had one of the most compelling arguments, which has probably become even stronger since yesterday. Judge Analisa Torres is not likely to have missed the hearing.
Also supportive along these lines is likely that all of the committee’s Republicans sent a letter to SEC Chairman Gensler accusing him of trying to force digital asset trading platforms to “come in and register” under his nonexistent registration process. Susan Friedman, International Policy Counsel at Ripple, commented on this:
A direct rebuke by @FinancialCmte to Chair Gensler’s (false) claim that crypto markets are suffering from a lack of compliance rather than a lack of clarity. ‘The only entity to blame for the lack of registrants is the SEC itself.’
In addition, Warren Davidson has introduced a bill that proposes restructuring the SEC and firing Gensler:
To correct a long series of abuses, I’m introducing legislation that removes the chairman of the Securities and Exchange Commission and replaces the role with an executive director that reports to the board where all authority would reside.
Is XRP a security? @WarrenDavidson tells Gary to his face he’s proposing legislation to fire him! pic.twitter.com/RGHcVMqN6H
— Digital Asset Investor (@digitalassetbuy) April 18, 2023
At press time, the XRP price stood at $0.4901, seeing a drop along with a market-wide correction.
Featured image from capital.com, chart from TradingView.com