Rep. Ritchie Torres (D-N.Y.) raised concerns over the usage of the term “digital asset security” by the U.S. Securities and Exchange Commission (SEC,) questioning its legal basis and origin.

What Happened: During a recent congressional hearing, the Democratic Congressman asked Daniel Gallagher, former SEC commissioner, and currently the Chief Legal Officer at Robinhood, if he knew about the existence of such a term in any law enacted by the Congress or in any rule promulgated by the SEC. Gallagher responded in the negative.

“If it comes from neither statute nor rule, then where does it come from,” Torres wrote in an X post. “The SEC invented the term out of thin air.”

The hearing, entitled "Dazed and Confused: Breaking Down the SEC's Politicized Approach to Digital Assets," featured other market participants like Teddy Fusaro, president of Bitwise Asset Management, as witnesses.

The term ‘digital asset security' does not appear anywhere in any law enacted by Congress or in any rule promulgated by the SEC or in any decision rendered by the Supreme Court. It appears nowhere in the 2 million pages of the Federal Register. If it comes from neither statute… pic.twitter.com/ucSaCzEvOU — Rep. Ritchie Torres (@RepRitchie) September 19, 2024

See Also: Jamie Dimon Says JPMorgan Is Likely ‘One Of The Bigger Users’ Of Blockchain Technology, But Calls Cryptocurrencies A ‘Pet Rock’

Why It Matters: This is not the first time Torres has challenged the SEC’s stance on digital assets. In a previous correspondence with SEC Chair Gary Gensler, Torres urged the agency to reconsider its aggressive approach towards cryptocurrencies.

He questioned whether the SEC intended to reevaluate its hardline stance on cryptocurrencies, following its unsuccessful lawsuit against Ripple Labs, where the court determined that XRP XRP/USD does not qualify as a security.

The SEC invited criticism from the cryptocurrency community after labeling as many as 12 tokens on Binance as securities, as part of a lawsuit against the cryptocurrency exchange in June 2023.

However, in a recent filing, the regulator “regretted any confusion” caused by the usage of the term “crypto asset. securities.”

"The SEC regrets any confusion it may have invited" by falsely and repeatedly stating that tokens themselves are securities. This is the remarkable representation in Footnote 6 of @SECGov's Amended Complaint against Binance. I hope @s_alderoty is getting some good sleep tonight.… pic.twitter.com/PpbprvkGxh — paulgrewal.eth (@iampaulgrewal) September 13, 2024

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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.

Photo courtesy: Flickr

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