Regulation
House Cryptocurrency Bill Creates ‘Immeasurable Risk’
The head of SEC says new cryptocurrency legislation will undermine his agency’s work.
Hours before the vote scheduled for Wednesday (May 22), Securities and Exchange Commission (SEC) Chairman Gary Gensler released a statement disparaging the Financial Innovation and Technology for the 21st Century Act (FIT 21).
THE legislationGensler said, “it would create new regulatory gaps and undermine decades of precedent regarding the oversight of investment contracts, exposing investors and capital markets to immeasurable risk.”
He went on to list a litany of problems with the bill. For example, he has said he will remove investment contracts recorded on blockchain from the legal definition of securities and the protections of most federal securities laws.
“Furthermore, by removing this set of investment contracts from the legal list of securities, the bill implies what courts have repeatedly established – but what cryptocurrency market participants have attempted to deny – that many crypto assets are offered and sold as securities under existing law,” Gensler added.
The bill would allow companies to self-certify that they are issuing “digital goods” and would also give the SEC 60 days to determine whether such goods meet the law’s definition of a digital commodity.
“There are currently more than 16,000 crypto assets. Given the limitations on staff resources and the absence of new resources under the bill, it is implausible that the SEC could review and challenge more than a fraction of those resources,” the Chairman said.
“The result could be that the vast majority of the market could avoid even the limited SEC oversight mandated by the cryptocurrency securities bill.”
Presented last summerFIT21 establishes federal requirements on digital assets, giving the Commodity Futures Trading Commission (CFTC) new jurisdiction over digital commodities and clarifying the SEC’s role in governing digital assets as part of an investment contract.
The bill also establishes a process to allow secondary market trading of digital commodities initially offered as part of an investment contract and imposes requirements on entities required to register with the CFTC or the SEC, according to the release.
The cryptocurrency industry has long been looking for more regulatory clarity from Washington, and this bill helped the industry achieve that goal, PYMNTS reported when the bill was introduced.
FIT21 would determine when a cryptocurrency is at commodity or title and assign oversight as appropriate between the CFTC and the SEC.
Assuming the bill makes it to the House, many observers have noted that it has no clear path to the Senate and may not become law this year.
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