The head of the SEC said the new cryptocurrency legislation would harm the work of his agency.
Hours before the vote scheduled for Wednesday, May 22, Securities and Exchange Commission (SEC) Chairman Gary Gensler issued a statement denouncing the Financial Innovation and Technology for the 21st Century Act (FIT 21).
The legislation, Gensler said, “would create new regulatory gaps and undermine decades of precedent for oversight of investment contracts, thereby exposing investors and capital markets to immeasurable risks.”
He then listed a litany of problems with the bill. For example, he said it would remove investment contracts recorded on the blockchain from the legal definition of securities and protections from 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 ruled – but what crypto market participants have attempted to deny – that many crypto assets are offered and sold as securities under applicable law. “added Gensler.
The bill would allow companies to self-certify that they issue “digital products” and would also give the SEC 60 days to determine whether those assets meet the bill’s definition of a digital product.
“There are currently over 16,000 crypto assets. Given the limitations on staff resources and the lack of new resources provided by the bill, it is implausible that the SEC would be able to review and challenge more than a fraction of these assets,” the President said.
“The result could be that the vast majority of the market could avoid even limited SEC oversight contemplated by the bill for crypto asset securities.”
Introduced last summer, FIT21 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 under the framework. of an investment contract.
The bill also establishes a process to permit secondary market trading of digital products originally offered under an investment contract and imposes requirements on entities to be registered with the CFTC or SEC, depending on the press release.
The crypto industry has long sought 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 a commodity or security and assign appropriate oversight between the CFTC and the SEC.
Assuming the bill passes the House, many observers have noted that there is no clear path through the Senate and that it may not become law this year.
