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House Republicans Unite Against SEC Rules, Call for Recall to Sustain Digital Asset Industry Growth

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House Republicans called for withdrawing the proposed rules by the Securities and Exchange Commission (SEC), stating that it would hinder the growth of the digital asset industry. In a letter addressed to the SEC, a group of members of the House Financial Services Committee expressed concern about the potential impact of the regulation, arguing that it could widen the definition of exchange to include a “communication protocol system” and extend its reach beyond centralized exchanges.

The lawmakers argued that the rule, if implemented, would broaden the scope of its regulation to individuals who “act ‘with'” in digital asset ecosystems, including software developers and participants in blockchain network consensus mechanisms. They also highlighted the possibility of the rule affecting software developers and those involved in the blockchain network’s consensus mechanism.

The letter has the support of nearly 30 lawmakers, including Patrick T. McHenry, Chair of the House Financial Services Committee, French Hill, Tom Emmer, and Warren Davidson. Additionally, lawmakers accused SEC Chairman Gary Gensler of leveraging the proposal to advance his personal opinion on digital assets. They cite Gensler’s past statements equating decentralized financial exchanges (DeFi) with traditional intermediaries in financial markets, regardless of the unique nature of their creators.

Additionally, lawmakers accused the SEC of predating Congress by proposing regulations while the House Agriculture Committee was working on legislation to oversee digital assets. The two committee leaders have released initial draft regulatory acts, including provisions that would classify cryptocurrencies as securities or commodities and introduce regulations for exchanges, among other aspects.

McHenry stated his intention to hold a vote on the bill in mid-July, stressing that it was still in the draft stage. He noted enough time for members to find common ground and form legislation during the post-July 4th committee recess.

House Republicans are raising concerns about the proposed SEC rules, urging their withdrawal to avoid hindering the development of the digital asset industry. They believe that the broad scope of the rules and the potential implications on a wide range of stakeholders, including software developers and participants in blockchain networks, require further consideration and alignment with forthcoming legislation being proposed by the House Financial Services Committee and the House Agriculture Committee.

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