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SEC Chairman Gary Gensler Criticizes Crypto Market Bill Ahead of House Vote
Hours before the US House of Representatives was set to vote on an encryption bill, President Biden released a declaration saying he is against the legislation, but not threatening to veto it.
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The White House expressed opposition to the bill, ‘The Financial Innovation and Technology for the 21st Century (FIT21) Act,’ on Wednesday afternoon due to concerns about inadequate investor protections.
The bill, ‘The Financial Innovation and Technology for the 21st Century (FIT21) Act, would effectively classify cryptocurrency as a commodity, not a security, and would therefore make it exempt from securities regulations.
“The Administration looks forward to working with Congress to ensure a comprehensive and balanced regulatory framework for digital assets, building on existing authorities, that will promote responsible digital asset development and payments innovation and help reinforce U.S. leadership. in the global financial system,” the White House statement said. “HR 4763 in its current form lacks sufficient protections for consumers and investors who engage in certain digital asset transactions.”
The statement was made just hours after US Securities and Exchange Commission Chairman Gary Gensler publicly expressed his opposition to the project.
Gensler stated, “FIT21 would create new regulatory loopholes and undermine decades of precedent regarding oversight of investment contracts, placing investors and capital markets at immeasurable risk.” He reiterated his position on cryptocurrencies as securities, expressing concern that the bill would exclude blockchain-registered investment contracts from the legal definition of securities and therefore the protections of federal securities laws.
“Further, 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 crypto assets are being offered and sold as securities under existing law,” the chair added.
The bill would allow companies to self-certify that they are issuing digital commodities and would also give the SEC 60 days to determine whether those assets meet the bill’s definition of digital commodities.
“There are more than 16,000 crypto assets currently. Given the limits on personnel resources and no new resources provided by the bill, it is implausible that the SEC could review and challenge more than a fraction of these assets,” he said.
FIT21 was introduced last summer to determine whether a cryptocurrency should be classified as a commodity or a security and assign oversight accordingly between the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC).
Per Forbes, Republican candidate and former US President Donald Trump and his advisors also support the crypto market framework project. Trump, who used to criticize encryption as a fraud against the US dollar, is now promoting himself as a crypto candidate. Yesterday he announced that he would start accepting campaign donations in crypto.
The crypto industry has been eagerly awaiting regulatory action from US authorities and advocating for changes in laws to prevent crypto from being categorized as a security.
The SEC chairman, however, referred to crypto as a security from time to time and asserts that it is under its jurisdiction. Gensler, who previously taught a course on blockchain and cryptocurrencies at the Massachusetts Institute of Technology, is known for his strict approach to crypto regulation. He called the cryptocurrency market the Wild West, emphasizing its need for regulation.