According to "The Block" report, U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler publicly expressed his opposition to the "Financial Innovation and Technology Act of the 21st Century" (FIT21) in a statement issued on Wednesday (22nd), believing that this The market structure bill will create new regulatory loopholes and undermine decades of precedents on the supervision of investment contracts, exposing investors and capital markets to immeasurable risks.
Gensler’s main argument is that he believes H.R. 4763 (FIT21) undermines the classification of crypto-assets as investment contracts, which would take these assets out of SEC regulation and hinder investor protection efforts.
Gensler said FIT21 may allow cryptocurrency companies to self-certify their cryptocurrency investments and products as "decentralized" and classify them as a "special category" of "digital commodities" to avoid SEC scrutiny. Gensler said the agency’s ability to challenge these self-certifications will be limited due to resource constraints, which could leave the vast majority of the crypto market unregulated.
Gensler said:
“This self-certification (process) not only creates risks for investor protection in the cryptocurrency space; it may also create risks for investors seeking to evade strict disclosure, prohibitions against the loss and theft of customer funds, SEC enforcement, and investor protection at the federal level. Individual rights of action in the courts provide a way to disrupt the broader $100 trillion capital market.”
Gensler added: “If perpetrators of pump and dump scams and penny stock promoters argue that they are not Bound by securities laws, what should I do?”
Gensler also said the bill would exclude cryptocurrency trading platforms from the definition of an exchange and remove historically tested frameworks such as the Howey test, which would ultimately put investors at risk.
Upcoming vote in the House of Representatives
The FIT21 bill, led by Republican U.S. House members, takes a comprehensive approach to regulating the larger crypto ecosystem and aims to place more responsibility on the Commodity Futures Trading Commission (CFTC).
The House of Representatives plans to vote on the FIT21 bill later on Wednesday. Foreign media "The American Prospect" quoted people familiar with the matter as reporting that former U.S. House Speaker Nancy Pelosi is considering voting in support of the cryptocurrency bill.
“The cryptocurrency industry’s record of failures, fraud, and bankruptcies is not because we don’t have rules, nor is it because the rules are unclear,” Gensler said in his statement. “It is because many participants in the cryptocurrency industry do not follow the rules.”
Related reports: "Foreign media: Democratic House members will not be forced to vote against two cryptocurrency-related bills" "Coinbase: The main upcoming catalyst for the crypto market may be driven by regulation"
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