Dan Gallagher, Robinhood’s Chief Legal Officer and a former SEC Commissioner, testified before the U.S. House Financial Services Subcommittee on Digital Assets. Wherein, he criticized the “scorched earth” approach the SEC has on cryptocurrencies.
Gallagher disclosed that Robinhood had over a dozen meetings with the SEC in an effort to register, but still resulted in a Wells notice from the enforcement division.
According to Gallagher, Robinhood to be registered as a digital asset broker-dealer under the SEC. Robinhood claimed to have dedicated efforts and resources to implement the regulations set by the Commission. They spent over a year seeking guidance from the SEC. However, the SEC dismissed all of these dedicated efforts; instead, sent a Wells notice to Robinhood.
Gallagher said that the agency had failed to provide feedback to companies and therefore clarity on the matter. Robinhood also had planned to operate within the framework established by the SEC, limiting the coins it listed and excluding ICOs and proprietary trading. However, the SEC’s actions highlighted the issue of ambiguity surrounding the regulation of cryptocurrencies.
Concerns Over Regulation by Enforcement
Gallagher had also voiced concerns on the enforcement-first approach used by the SEC instead of having a set of rules to govern digital assets. He argued this is harmful to American consumers and also damping innovation.
Gallagher pointed out that other regions, such as the European Union, have provided clear guidelines that define the legal environments, encouraging solution innovation. In contrast, the U.S. has somehow lost its position in the digital asset industry.
Recent legal decisions questioning the SEC’s actions were also a topic of the testimony. Gallagher mentioned federal bench judges who criticized the agency’s litigation approach, which has introduced biases into the process. This lack of direction has caused confusion among services operating in the cryptocurrency market and end-users.
Call for Regulatory Framework
To ensure the proper handling of digital assets, Gallagher has urged Congress to create a regulatory structure. He noted that the SEC has had the legal authority since 1996 to establish a temporary set of rules but has not done so. He recommended that the Commission could set standard guidelines for platforms interested in engaging in the trading of digital assets.
Gallagher’s testimony highlighted Robinhood’s efforts to comply with SEC regulations and his disappointment with the agency’s current approach. He called for more clarity and a regulatory framework that supports innovation without stifling growth in the U.S. digital asset market.
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