On May 22, Securities and Exchange Commission (SEC) Chairman Gary Gensler issued a statement strongly opposing the 21st Century Financial Innovation and Technology (FIT21) Act.
The FIT21 Act is widely known for providing regulatory clarity to the cryptocurrency industry. However, Gensler criticized the bill, arguing that it would weaken current consumer protections in the cryptocurrency market.
President Biden's administration has said it opposes passing the bill. However, the White House has made clear that it is ready to work with the US Congress to “ensure a comprehensive and balanced regulatory framework for digital assets, building on existing authorities.”
Notably, the U.S. House of Representatives is expected to vote on the bill later today, May 22nd.
Gensler's opposition
Gensler warned that the proposed bill would create significant regulatory gaps, undermine decades of precedent in the oversight of investment contracts, and expose investors and capital markets to significant risks.
The SEC Chair further emphasized that this regulation would prevent blockchain-based investment contracts from being classified as securities. The change will allow issuers of crypto investment contracts to self-certify that their products are decentralized, effectively removing them from SEC oversight. he added:
“The SEC has only 60 days to review and challenge the finding that a product is a digital good. Those that the SEC successfully challenges will be reclassified as restricted digital assets and many Subject to the bill's lighter SEC oversight regime that excludes core protections.
Gensler also criticized the bill for abandoning the Howey test, a key method for determining whether an investment qualifies as a security. He argued that this would reduce protection for the small number of investment contracts that are considered securities. Furthermore, he pointed out the risks posed by not classifying crypto trading platforms as exchanges.
Gensler emphasized that the bill poses a significant threat to U.S. capital markets and their investors. He said the bill would weaken capital markets by making it easier for companies to evade enforcement actions.
FIT21 is supported
Despite Gensler's opposition to the bill, the proposed bill has strong support from the U.S. Congress and the crypto community.
Rep. French Hill, chair of the Subcommittee on Digital Assets, Financial Technology, and Inclusion, said in a May 21 statement that the bill would give the SEC authority over digital assets that are not certified under the law. , said it provides suitable securities to protect digital assets. Another situation he has is like FTX.
Several crypto companies, including Coinbase, Circle, Kraken, Gemini, and advocacy group Stand With Crypto, urged US lawmakers to support the bill. The Crypto Council for Innovation (CCI) stated:
“While FIT 21 will introduce new compliance challenges for digital asset companies, there is no doubt that regulatory clarity would be more responsible, safer for consumers, and preferable to the status quo. ”
Regarding the bill, which is awaiting a vote today, the White House confirmed that although it is “opposed” to the bill, it will not veto it if it passes. This vote will be one of the most important crypto-related bills to be voted on in Congress.
