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SEC Chairman Gensler opposes proposed legislation aimed at creating regulatory clarity in the cryptocurrency industry
SEC Chairman Gary Gensler disapproves of the FIT21 bill that will be up for a vote today in the U.S. House of Representatives.
THE legislation, dubbed the Financial Innovation and Technology for the 21st Century Act (FIT21), seeks to clarify the regulatory boundaries for cryptocurrency assets between the SEC and CFTC. This comes amid a clash between the two agencies as regulatory uncertainty overwhelms the US cryptocurrency market.
Gensler’s position flies in the face of the bipartisan support the bill has received as the House of Representatives prepares to vote today. In his declarationthe SEC chairman argued that the proposed legislation could pose financial risks to investors.
SEC Chairman Expresses Concern Against FIT21
His main concern is that the bill would undermine existing securities laws. He pointed out that federal securities laws, established in response to the Great Depression, have been critical to protecting investors for nearly a century.
These regulations require thorough disclosure by issuers and rigorous oversight of intermediaries to combat fraud and uphold market integrity. Gensler argues that the FIT21 bill would lead to regulatory gaps by exempting blockchain investment contracts from the definition of titles.
Such a move could reduce safeguards for investors by allowing issuers to self-certify their offerings as decentralized, effectively evading SEC oversight. Gensler believes the bill’s provision of just 60 days for the SEC to challenge these certifications is inadequate, particularly considering the wide range of cryptocurrencies currently in circulation.
Furthermore, he condemned the bill for abandoning the Anyway, try, a well-established Supreme Court ruling used to evaluate whether an asset meets the criteria for a security based on its economic substance. He warned that the bill’s approach could erode investor protections and increase risks within broader capital markets.
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Gensler also highlighted the potential conflict of interest and diminished custody protections that could result from the bill’s provisions. He argues that the bill would allow crypto platforms to legally take actions that could jeopardize investors’ interests if it excluded these platforms from the definition of an exchange.
Furthermore, it says the expansive exemption for entities classified under “Decentralized Finance” could pave the way for substantial regulatory gaps.
The need for regulatory clarity
The cryptocurrency industry has consistently clashed with the SEC’s regulatory strategy, which has focused primarily on enforcement actions. Notable lawsuits against major crypto entities like Ripple, Coinbase AND Binance have sparked considerable controversy.
Industry leaders argue that the SEC’s actions hinder innovation and generate uncertainty. They support well-defined regulatory frameworks that accommodate the distinctive characteristics of digital assets.
FIT21 supporters believe the bill could lead to regulatory clarity. They argue that current securities laws are inadequate to address the cryptocurrency market. The goal is to encourage innovation while ensuring sufficient investor protection by differentiating securities from commodities.
However, Gensler argues that FIT21 would do more harm than good. He warned that the bill’s self-certification mechanism could lead to widespread non-compliance and harm to investors, extending beyond the cryptocurrency sector to impact broader capital markets.
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