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SEC Chairman Gensler opposes today’s FIT21 vote, but White House calls for no ‘veto’
Gary Genslerchairman of the U.S. Securities and Exchange Commission (SEC), released a statement on May 22 expressing strong opposition to the Financial Technology and Innovation for the 21st Century (FIT21) Act.
THE FIT law21 is widely celebrated for bringing regulatory clarity to the cryptocurrency industry. However, Gensler criticized it, arguing that the bill would weaken existing consumer protections in the cryptocurrency market.
President Biden’s administration has said it opposes passage of the bill. However, the White House made clear that it is willing to work with the US Congress to “ensure a comprehensive and balanced regulatory framework for digital assets, building on existing authorities”.
Notably, the US House of Representatives will vote on the bill later today, May 22.
Gensler’s dissent
Gensler warned that the proposed bill would create significant regulatory gaps, undermining decades of precedent in oversight investment contracts and place investors and capital markets at substantial risk.
The SEC chairman also highlighted that the regulation would prevent blockchain-based investment contracts from being classified as securities. This change would allow issuers of cryptocurrency investment contracts to self-certify their products as decentralized, effectively removing them from SEC oversight. He added:
“The SEC would have only 60 days to review and challenge the certification that a product is a digital commodity. Those that the SEC successfully challenges would be reclassified as restricted digital assets and subject to the bill’s lighter SEC oversight regime that excludes many key protections. “
Additionally, Gensler criticized the bill for abandoning the Try Howey, a key method for determining whether an investment qualifies as a security. He argued that this would lead to a reduction in protections for the few investment contracts that are considered securities. Furthermore, he highlighted the risks of excluding cryptocurrency trading platforms from being classified as exchanges.
Gensler stressed that the bill poses a significant threat to the American capital market and its investors. He said the legislation would undermine capital markets by allowing companies to more easily evade enforcement actions.
FIT21 enjoys support
Despite Gensler’s antagonism towards the bill, the bill enjoys strong support from the US Congress and the crypto community.
On May 21st declarationRep. French Hill, chairman of the Subcommittee on Digital Assets, Financial Technology and Inclusion, said the bill gives the SEC authority over digital assets that are not certified under the legislation and would provide adequate safeguards to protect against another situation similar to FTX.
Several crypto companies, including CoinbaseCircle, Kraken, Twinsand the advocacy group Stand With Crypto, have done so solicited US lawmakers support the legislation. The Crypto Council for Innovation (CCI) declared:
“FIT 21 will introduce new compliance challenges for digital asset companies, but regulatory clarity is arguably more accountable, safer for consumers and preferable to the status quo.”
While the bill awaits today’s vote, the White House has confirmed that he will not attempt to veto it if it passes, even if he “opposes” the bill. The vote will now likely be one of the most important pieces of cryptocurrency legislation for Congress to vote on.