Rep. Ritchie Torres (D-N.Y.) has thrown down the gauntlet, challenging the U.S. Securities and Exchange Commission (SEC) over its use of the term ‘digital asset security.’ He argues that the term lacks any legal foundation and was essentially ‘invented’ by the SEC.
During a recent congressional hearing, Rep. Torres questioned Daniel Gallagher, former SEC commissioner and currently Chief Legal Officer at Robinhood, about the existence of the term ‘digital asset security’ in any legislation passed by Congress or any SEC rule. Gallagher responded in the negative, leaving Rep. Torres to declare on X (formerly Twitter), “If it comes from neither statute nor rule, then where does it come from? The SEC invented the term out of thin air.”
This isn’t the first time Rep. Torres has taken aim at the SEC’s handling of digital assets. Previously, he urged SEC Chair Gary Gensler to reconsider the agency’s aggressive stance on cryptocurrencies. He questioned whether the SEC would re-evaluate its hardline approach after its unsuccessful lawsuit against Ripple Labs, where the court decided XRP did not qualify as a security.
The SEC has faced significant pushback from the cryptocurrency community after labeling as many as 12 tokens on Binance as securities as part of a lawsuit against the cryptocurrency exchange in June 2023. However, in a recent filing, the regulator expressed regret for “any confusion” caused by its use of the term “crypto asset securities.”
Rep. Torres’s challenge highlights the ongoing debate surrounding the regulation of digital assets. The SEC’s classification of certain cryptocurrencies as securities has sparked controversy, with some arguing that it stifles innovation and hinders the growth of the industry. Rep. Torres’s questioning of the legal basis for the term ‘digital asset security’ further emphasizes the need for clearer regulatory frameworks and more transparency in the SEC’s approach to digital assets.
