According to a report by “The Block,” Gary Gensler, the Chairman of the U.S. Securities and Exchange Commission (SEC), publicly expressed his opposition to the “21st Century Financial Innovation and Technology Act” (FIT21) in a statement released on Wednesday (22nd). He believes that this market structure bill will create new regulatory loopholes and disrupt decades of precedent regarding the supervision of investment contracts, exposing investors and capital markets to incalculable risks.
Gensler’s main argument is that the FIT21 bill undermines the classification of cryptocurrencies as investment contracts, which would remove these assets from SEC regulation and hinder investor protection efforts.
Gensler suggests that FIT21 could allow cryptocurrency companies to self-proclaim their investments and products as “decentralized” and classify them as a “special category” of “digital commodities,” thereby evading SEC scrutiny. Gensler states that due to resource constraints, the agency’s ability to challenge these self-proclaimed assertions would be limited, potentially resulting in the majority of the crypto market going unregulated.
Gensler states, “What happens if criminals behind pump and dump schemes and penny stock promoters claim they are not subject to securities laws by touting themselves as cryptocurrency investment contracts or self-proclaiming they are decentralized systems?”
Gensler also claims that the bill excludes cryptocurrency trading platforms from the definition of exchanges and removes tested frameworks such as the Howey Test, ultimately exposing investors to risks.
The FIT21 bill, led by Republican lawmakers, takes a comprehensive approach to regulating the larger cryptocurrency ecosystem and aims to give more responsibility to the Commodity Futures Trading Commission (CFTC).
The House of Representatives plans to vote on the FIT21 bill later on Wednesday, with Nancy Pelosi, the former Speaker of the House, reportedly considering supporting the cryptocurrency legislation, according to The American Prospect.
Related reports: “Foreign media: Democratic lawmakers will not be forced to vote against two cryptocurrency-related bills” and “Coinbase: Regulatory push could be the main catalyst for the upcoming crypto market.”
