Tech
SEC Chairman Strongly Opposes Crypto-Friendly Bill Ahead of Key Vote
In a statement released Wednesday, Securities and Exchange Commission (SEC) Chairman Gary Gensler expressed his strong opposition to the Financial Innovation and Technology for the 21st Century Act, also known as the FIT21 Act.
According to transcript published by the SEC, Gensler believes the proposed legislation, H.R. 4763, would undermine regulation and demolish precedents of oversight of investment contracts, with serious consequences. He said:
[The legislation] It would create new regulatory gaps and undermine decades of precedent regarding the oversight of investment contracts, exposing investors and capital markets to immeasurable risk.
Gensler’s main concern is that FIT21 could allow crypto firms to self-certify their investments and products as “decentralized” and falling into a “special class” of “digital commodities,” thus avoiding SEC scrutiny. He argues that the SEC’s ability to challenge these self-certifications would be limited by resource constraints, potentially leaving much of the cryptocurrency market unregulated. He added:
Furthermore, by removing this set of investment contracts from the legal list of securities, the bill implies what courts have repeatedly established – but what cryptocurrency market participants have attempted to deny – that many crypto assets are being offered and sold as securities under existing law.
“Rules not unclear, but not followed”
Additionally, Gensler pointed out that the bill excludes cryptocurrency trading platforms from the definition of an exchange and eliminates historically tested frameworks such as the Howey test, which he believes would ultimately put investors at risk. He stressed that the cryptocurrency industry’s record of failures, frauds and failures is not due to a lack of rules or unclear regulations, but rather to the fact that many cryptocurrency industry players do not adhere to existing rules.
Despite Gensler’s concerns, FIT21 has garnered support from 60 crypto organizations, including Gemini, Kraken, Coinbase, and Digital Currency Group. These organizations signed a letter stating that digital asset companies are currently bound by securities laws designed nearly a century ago. The bill, led by the US Republican Party, aims to place more responsibility on the Commodity Futures Trading Commission (CFTC) in regulating the broader crypto ecosystem.
Notable supporters of the bill include Republican candidate and former US President Donald Trump and his advisors, who believe that FIT21 could provide a more comprehensive approach to regulating the cryptocurrency industry. The U.S. House of Representatives plans to vote on the bill later Wednesday.
The news follows recent reports that the US Senate has joined forces with the House of Representatives Undo the SEC’s controversial crypto policy. The policy required companies holding clients’ cryptocurrencies to record them on their balance sheets, potentially having significant capital implications for banks working with crypto clients.
Just yesterday Ethereum (ETH) surged around 21% in 24 hours after analysts began suggesting that the coin could soon see the approval of your spot exchange-traded fund.