By Pete Schroeder and Michelle Price
WASHINGTON (Reuters) -U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler defended his agency's position on cryptocurrencies and its push to include climate risks into public company disclosures before the U.S. Senate Banking Committee on Thursday.
Gensler appeared 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.
But in prepared testimony released ahead of the hearing, Gensler insisted his new rules are critical to ensuring the U.S. capital markets remain the global "gold standard."
Democratic Senator Sherrod Brown applauded Gensler's ambitious agenda. "If Wall Street and its allies are complaining, it probably means you’re doing your job," he said.
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.
"The cost of compliance will be more material to the investor than the information itself," the committee's top Republican Pat Toomey said in his opening remarks.
He also warned that the SEC should be "nervous" about legal challenges 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 its climate rule.
Jon Tester, a Democratic U.S. Senator from Montana, also raised concerns about the potential impact of the climate rule on small business owners like farmers who could be ensnared by its requirement for public companies to disclose emissions in their supply chains.
But Gensler, in his testimony, said the rule would provide needed clarity and consistency to an issue important to investors and being disclosed by some companies under disparate frameworks, and later added the agency was considering all feedback.
Republicans also pressured Gensler on what they see is his increasingly hawkish stance on cryptocurrency oversight.
Gensler made headlines last week when he said crypto companies may need multiple SEC registrations and split their operations into separate legal entities.
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.
Toomey, though, said the SEC has failed to provide regulatory clarity in the crypto market and accused the SEC of being asleep at the wheel as crypto lending platforms Celsius Network and Voyager Digital collapsed this summer, leaving thousands of retail customers unable to access their assets.
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.
(Reporting by Michelle Price and Pete Schroeder; Editing by Josie Kao and Diane Craft)