Pat Toomey Blamed The SEC For The Crisis in Crypto Lending Platforms

Senator Pat Toomey blamed the SEC for the crisis happening among the crypto lending platforms. He says that the regulation-by-enforcement approach is ineffective so let’s have a closer look at today’s latest cryptocurrency news.

Senator Pat Toomey blamed the SEC and showed his vocal support for the industry, saying that the regulator could have prevented the loss of $12 billion in assets by investors that trusted Celsius as a lending platform and froze their deposits in June. The official letter from Toomey to the SEC chairman Gary Gensler suggested that the Commission’s inability to clarify how it will apply the existing securities laws to the digital asset services, drew significant repercussions as Toomey wrote:

“Companies could have adjusted product offerings accordingly, preventing investor losses today, and the SEC would have been free to focus enforcement efforts on the worst actors.”

According to Toomey, the SEC didn’t explain how the Howey and the Reves tests applied to the lending paltform products that paid the interest to the customers and made crypto deposits. He outlined that the SEC is choosing to regulate by selective enforcement. The senator mentioned that the insider trading charges against a former Coinbase employee claimed that the SEC had an option on the securities status of these assets but it didn’t disclose the view publicly before launching the enforcement action.

Starting from a dubious presumption that most digital assets are securities, he noted that the SEC made it hard for well-intenioned companies to comply and don’t serve better protection for customers with the regulation by enforcement style. As a result, the SEC continued refusal to give regulatory clarity to the community and combined it with a sluggish enforcement pace which harmed not only the investors but also the innovation.

Toomey asked a few questions aimed at Gensler with a request to respond by August 9. Among them is a proposition to identify other major lending companies that hold no registration under the sEC but also explain why the Commission hasn’t included 16 out of 25 digital assets that were traded by the Coinbase employee into the charges. Toomey revealed his support for the Stablecoin Innovation and Protection Act which will allow the Federal Deposit Insurance Corporation to back the stablecoins similar to deposits.