According to a report by “The Block”, Gary Gensler, 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), stating that this market structure bill would create new regulatory loopholes and disrupt decades of precedent regarding the supervision of investment contracts, posing incalculable risks to investors and capital markets.
Gensler’s main argument is that he believes the H.R. 4763 bill (FIT21) undermines the classification of crypto assets as investment contracts, which would exempt these assets from SEC oversight and hinder investor protection efforts.
Gensler stated that FIT21 may allow cryptocurrency companies to self-assert their cryptocurrency investments and products as “decentralized” and categorize them as a “special category” of “digital commodities”, thereby evading SEC scrutiny. Gensler expressed that due to resource constraints, the agency’s ability to challenge these self-assertions will be limited, potentially resulting in the vast majority of the crypto market going unregulated.
Gensler also added, “What if criminals involved in Pump and Dump schemes and penny stock promoters claim to be exempt from securities laws by proclaiming themselves as crypto investment contracts or self-asserting they are decentralized systems?”
Gensler further stated that the bill would exclude cryptocurrency exchanges from the definition of exchanges and remove established frameworks such as the Howey Test, ultimately exposing investors to risks.
The FIT21 bill, led by Republican House members in the United States, takes a comprehensive approach to regulate a larger crypto ecosystem and aims to give more responsibility to the Commodity Futures Trading Commission (CFTC).
The House plans to vote on the FIT21 bill later on Wednesday, with “The American Prospect” citing sources reporting that former U.S. House Speaker Nancy Pelosi is considering voting in support of this cryptocurrency bill.