Regulation
US Lawmakers Seek to Clean Up “Food Fight” of Cryptocurrency Regulation
The US House of Representatives adopted a bill on Wednesday that would create a new legal framework for digital currencies, a move welcomed by cryptocurrency advocates but opposed by consumer groups who say it fails to protect investors.
The Republican-backed Financial Innovation and Technology for the 21st Century Act, known as FIT21, would split responsibility for regulating cryptocurrencies between the Securities and Exchange Commission and the Commodities Futures Trading Commission.
The bill would strengthen the CFTC’s regulatory authority and weaken the SEC’s oversight of digital assets. He opposes the SEC and faces a steep rise in the Democratic-controlled Senate.
Defenders of digital currencies argue that regulators are stuck in the past and applying inadequate rules to oversee the explosion in popularity of cryptocurrencies.
House Republicans argue that FIT21 would strengthen oversight of the rapidly growing digital asset space, strengthening transparency and accountability of cryptocurrency exchanges, brokers and retailers.
“The SEC and CFTC are currently engaged in a food fight for control of this asset class,” Republican Patrick McHenry, chairman of the House Financial Services Committee, said in a statement.
“They have created an impossible situation in which the same companies are subject to competing and contradictory enforcement actions by the two different agencies.”
SEC Chairman Gary Gensler warned that the proposed rule would “create new regulatory gaps and undermine decades of precedent regarding the oversight of investment contracts, putting investors and capital markets at immeasurable risk.”
It said in a statement that investment contracts recorded on a blockchain would no longer be considered securities under the legislation, removing them from SEC oversight and denying investor protection.
– “Failures, frauds and bankruptcies” –
Crypto firms would be able to self-certify investments and products as part of a special class of “digital commodities” under the legislation, Gensler said, arguing that this would allow them to avoid SEC scrutiny.
“The cryptocurrency industry’s record of failures, frauds and failures is not due to a lack of rules or the rules being unclear,” he added.
“It’s because many players in the cryptocurrency industry don’t play by the rules. We should make the political choice to protect the investing public rather than facilitate the business models of non-compliant companies.”
A group of 30 consumer rights organizations wrote to congressional leaders opposing the bill on the grounds that it undermines a long-standing legal framework used to determine whether a transaction must adhere to stringent investor safeguards.
“Much of this bill seeks to circumvent these standards, in part by creating an expedited, rubber-stamp process to designate cryptocurrencies as ‘commodities,’ thereby narrowing the application of securities regulation to such assets and related actors “, they wrote in the letter dated Monday.
But 60 crypto organizations signed a letter in support of the bill, which is also supported by former US President Donald Trump, who is running for re-election and recently said he would begin accepting campaign donations in cryptocurrencies.
“Regardless of what some critics claim, this bill does not create a ‘soft’ regime for crypto criminals or prevent the SEC from being able to police its markets,” said Rep. French Hill, who chairs the subcommittee on digital resources.
The Biden administration said it was “eager to work with Congress to ensure a comprehensive and balanced regulatory framework for digital assets,” but added that it opposed the bill because it lacks “sufficient protections for consumers and investors.” .
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