Regulation
Gary Gensler slams FIT21 crypto bill ahead of House vote
WE Security and Exchange Commission (SEC) Chairman Gary Gensler publicly opposed the Financial Innovation and Technology for the 21st Century Act (FIT21), a bill aimed at regulating asset markets digital. He believes the bill would weaken the SEC’s ability to protect investors by reclassifying crypto assets and reducing regulatory oversight.
At the same time, the House is expected to vote on the bill, which faces notable opposition and an uncertain future in the Senate.
SEC Chairman Slams FIT21 Act for Reducing Regulatory Oversight
In a report released Wednesday, Gary Gensler expressed his strong opposition to the FIT21 Act. The law project, introduced in July 2023 by Chairman Glenn “GT” Thompson and supported by several key Republicans, goals establish clear federal guidelines for digital asset markets. It seeks to balance innovation with strong consumer protection and clarifies the SEC and Commodity Futures contracts Roles of the Trading Commission (CFTC) in regulating cryptocurrencies.
Gensler argues that the bill undermines the classification of crypto assets as investment contracts. This change removes these assets from SEC oversight, which would make it more difficult to protect investors.
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He noted that FIT21 could allow crypto companies to self-certify their products as “decentralized” digital products, thereby avoiding SEC scrutiny. Gensler warned that the SEC’s limited resources this would hinder its ability to challenge these certificationsleaving much of the crypto market unregulated.
Gensler also criticized the bill’s definition of a digital product. He said that he ignores the Howey test and the economic realities of assets. Additionally, he warned that FIT21 could harm the broader U.S. capital markets by allowing companies to evade SEC regulation through decentralized networks.
“The bill would remove investment contracts recorded on a blockchain from the legal definition of securities and the proven protections of much of the federal securities laws. By removing this set of investment contracts from the legal list of securities, the bill implies what courts have repeatedly ruled – but what crypto market participants have tried to deny – that many assets cryptographic assets are offered and sold as securities under applicable law,” Gensler. explain.
Stuart Alderoty, Chief Legal Officer of Ripple (CLO), shared his thoughts on Gensler’s position and current approach to cryptography regulation.
“He thought he was above Congressional oversight.” All that is gone. He is now a struggling political liability,” Alderoty said. said.
The House of Representatives is expected to vote on the bill on Wednesday. However, its passage in the Senate remains to be determined. If passed, the bill would change the Howey test and significantly reduce the SEC Oversight of Crypto Assets. Introduced in 1946, the Howey test determines whether a transaction is considered an investment contract and, therefore, a security.
At least eight House Democrats support the FIT21 Act and could gain more support. Former House Speaker Nancy Pelosi is reportedly considering support the bill. Although she is no longer part of the Democratic leadership, Pelosi’s views still influence many House Democrats.
If Pelosi supports the bill, she would oppose Democrats Maxine Waters and David Scott, who both oppose it. They fear the bill could lead to massive deregulation of crypto and some traditional securities. They believe this deregulation will seriously harm U.S. financial markets by removing essential protections for investors and consumers.
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BeInCrypto previously reported that Waters and Scott urged their colleagues to vote against the bill. However, House Democratic leaders said they will not oppose the FIT21 bill. As the debate continues, the outcome of the vote and its implications for the future of U.S. crypto regulation remain uncertain.
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