Crypto News Now: Gary Gensler of the SEC Denounces Crypto Bill Before Upcoming House Vote
Crypto News– U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler has publicly voiced his strong opposition to the Financial Innovation and Technology for the 21st Century Act, known as the FIT21 Act. In a statement released on Wednesday, Gensler expressed his concerns that this bill could create significant regulatory gaps and undermine decades of established oversight practices regarding investment contracts, thereby exposing investors and capital markets to unprecedented risks.
FIT21 would create new regulatory gaps and undermine decades of precedent regarding the oversight of investment contracts, putting investors and capital markets at immeasurable risk, Gensler stated.
Gensler’s primary argument revolves around his belief that the FIT21 Act, formally identified as H.R. 4763, threatens to redefine crypto assets in a way that removes them from the SEC’s regulatory oversight. This reclassification would hinder the SEC’s ability to protect investors, as it effectively exempts crypto assets from being treated as investment contracts. Gensler warned that the act could allow crypto firms to self-certify their investments and products as decentralized and categorize them under a special class of digital commodities. This process would enable these firms to bypass SEC scrutiny.
Gensler further elaborated on the risks of the self-certification process, stating that it would strain the SEC’s already limited resources, making it challenging to monitor and regulate a large portion of the crypto market. He emphasized that this could lead to widespread unregulated activities within the crypto space.
The self-certification process risks investor protection not just in the crypto space; it could undermine the broader $100 trillion capital markets by providing a path for those trying to escape robust disclosures, prohibitions preventing the loss and theft of customer funds, enforcement by the SEC, and private rights of action for investors in the federal courts, Gensler warned.
He also raised concerns about the potential misuse of these provisions by malicious actors. What if perpetrators of pump and dump schemes and penny stock pushers contend that they’re outside of the securities laws by labeling themselves as crypto investment contracts or self-certifying that they are decentralized systems? he questioned.
Additionally, Gensler criticized the bill for excluding crypto trading platforms from the definition of an exchange and for discarding historically effective frameworks like the Howey test. He argued that these changes would erode the regulatory foundations that have protected investors for decades, ultimately putting them at greater risk.
In conclusion, Gensler’s statement underscores his belief that the FIT21 Act poses serious threats to the stability and integrity of both the crypto market and the broader financial system. He urged lawmakers to consider the potential long-term consequences of the bill and to prioritize investor protection in any new regulatory framework for the burgeoning crypto industry.
Cryptocurrency Market Framework Bill
The Financial Innovation and Technology for the 21st Century Act, or FIT21, spearheaded by the U.S. Republican Party, represents a significant legislative effort to overhaul the regulatory landscape of the broader cryptocurrency ecosystem. The bill proposes to shift a substantial portion of regulatory oversight from the Securities and Exchange Commission (SEC) to the Commodity Futures Trading Commission (CFTC), aiming to streamline the regulation of digital assets and address the unique challenges posed by this rapidly evolving sector.
Support for FIT21 has been growing among prominent players in the crypto industry. Last week, a coalition of 60 cryptocurrency organizations, including major exchanges such as Gemini, Kraken, and Coinbase, along with the influential Digital Currency Group, collectively endorsed the bill. These organizations argue that current securities laws, which were established nearly a century ago, are ill-suited to address the nuances of modern digital assets. They believe that FIT21 offers a more appropriate regulatory framework that can foster innovation while ensuring adequate oversight.
In addition to industry support, the bill has garnered political backing from notable figures within the Republican Party. According to Forbes, former U.S. President Donald Trump and his advisors have expressed their endorsement of the crypto market structure bill. Trump has recently indicated his intention to accept campaign donations in cryptocurrency, highlighting his alignment with the bill’s objectives. On the other side of the aisle, House Speaker Nancy Pelosi (D-CA) is reportedly contemplating a vote in favor of the bill, as reported by The American Prospect on Tuesday.
FAQs
Who is supporting the FIT21 Act?
The FIT21 Act has garnered support from 60 cryptocurrency organizations, including major exchanges like Gemini, Kraken, and Coinbase, as well as the Digital Currency Group. Politically, former U.S. President Donald Trump and some of his advisors support the bill. House Speaker Nancy Pelosi is also considering a vote for the bill.
Why is SEC Chair Gary Gensler criticizing the FIT21 Act?
SEC Chair Gary Gensler criticizes the FIT21 Act because he believes it would create regulatory gaps and undermine established oversight practices regarding investment contracts. He argues that the bill would remove many crypto assets from SEC oversight, potentially putting investors and capital markets at significant risk.
What specific concerns does Gensler have about the FIT21 Act?
Gensler is concerned that the FIT21 Act would allow crypto firms to self-certify their investments and products as “decentralized” and classify them under a “special class” of “digital commodities.” This could enable these firms to bypass SEC scrutiny. He also worries that the act would limit the SEC’s ability to enforce existing rules, thereby reducing investor protections.
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