By John McCrank and Chris Prentice
(Reuters) - The head of the U.S. Securities and Exchange Commission came under fire on Tuesday from Republican lawmakers who said the agency was stifling financial innovation by rushing the pace of rulemaking in areas such as climate change risks and unclear rules on cryptocurrencies.
SEC Chair Gary Gensler was testifying in front of the House Financial Services Committee for the first time since Republicans took over the House of Representatives in January.
Under Gensler, the SEC has proposed 46 rules related to the $100 trillion capital markets, ranging from climate-related risk disclosures, investment adviser conduct, and market structure, and it has reopened comment periods for some other rules.
"This raises serious concerns that the rulemaking process is being rushed, undermining the quality of our securities laws and risking negative unintended consequences," said Republican Congressman Patrick McHenry, the committee's chairman.
Gensler, who has helmed the SEC since April 2021, underscored the agency's rulemaking as "grounded in legal authorities granted by Congress."
The SEC also levied record penalties in the last fiscal year and Republican lawmakers seized on the agency's nearly 50 enforcement actions against crypto firms, saying the agency was regulating by enforcement.
"Your approach is driving innovation overseas and endangering American competitiveness," said McHenry.
Gensler maintained most cryptocurrencies are securities and crypto firms must comply with securities laws.
"I've never seen a field that's so non-complying with laws written by Congress and affirmed over and over by the courts," he said regarding the crypto industry.
Investors have lost billions in recent years due to what regulators say are fraudulent schemes by some crypto firms, such as Terraform Labs, which saw its algorithmic stablecoin collapse, leading to market turmoil that led to the failure of several other major crypto companies.
Progressive lawmakers and investor advocates have praised the SEC and pushed Congress to give the agency more resources.
The "SEC has been outgunned for too long and it should get the resources it really needs to oversee a vast market with huge enforcement challenges, especially in the crypto space," Stephen Hall, legal director at Better Markets said in a statement.