U.S. Senate To Grill SEC's Gensler Over Climate, China And Crypto

An aggressive regulator is critical to maintaining the United States as the "gold standard" for capital markets, U.S. Securities and Exchange Commission (SEC) chair Gary Gensler will tell the U.S. Senate Banking Committee on Thursday.

Gensler will appear before the panel for its regular oversight duties, but the hearing comes at a time of Republican frustration over his agenda. They claim he has overstepped his authority with a broad assault on U.S. capital markets and adopted a hostile stance toward the financial industry.

Republican representative Tom Emmer told Reuters in July that, under Gensler, the SEC had "politicized rulemaking and discouraged good faith cooperation."

But in prepared testimony released ahead of the hearing, Gensler insisted his new rules are critical to the predominant status of U.S. markets.

"As markets have evolved, our rules have continued to evolve as well," he said. "I think we should do everything we can to maintain and enhance that gold standard of our capital markets."

CLIMATE RULE CONCERNS

Republicans are especially concerned about a draft SEC rule requiring public companies to disclose climate-related risks, including greenhouse gas emissions. Corporate groups say it is onerous and exceeds the agency's authority.

Gensler is likely to be grilled on the climate rule, especially in light of a recent Supreme Court decision to curb the Environmental Protection Agency's power, which some legal experts say undermines the SEC's authority on the rule.

But Gensler said the rule would provide needed clarity and consistency to an issue important to investors and being disclosed by some companies under disparate frameworks.

CRYPTOCURRENCY CRITICISMS

Republicans will also pressure Gensler on what some see as his increasingly hawkish stance on cryptocurrency oversight, said Isaac Boltansky, director of policy research for brokerage BTIG.

Gensler made headlines last week when he said crypto companies may need multiple SEC registrations and split their operations into separate legal entities.

Senator Pat Toomey, the senior Republican on the committee criticized Gensler's approach in July.

"What is the SEC doing now to help ensure the crypto community gets the regulatory clarity it has repeatedly asked for? They deserve answers now, not later."

In his prepared testimony, Gensler said such "disaggregation" could enhance investor protections and guard against conflicts of interest. He added that SEC staff was working with traditional market intermediaries interested in entering the crypto market, and urged Congress to not inadvertently undermine existing investor protections while crafting cryptocurrency legislation.

U.S.-CHINA AUDIT DEAL

Gensler also struck a cautious tone on a recent deal between U.S. and Chinese officials on auditing U.S.-listed Chinese firms, noting the accord is meaningful only if U.S. officials actually are permitted to fully investigate Chinese auditors.

If not, roughly 200 companies would still face the prospect of trading restrictions in the United States, he warned.

"There was a fair amount of fanfare after the agreement in August, but there are still some real questions about how the agreement will work and some understandable skepticism on Capitol Hill about its prospects for success," said Boltansky.