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House Crypto Bill Creates ‘Immeasurable Risk’
The head of SEC says new cryptocurrency legislation will harm his agency’s work.
Hours before the vote scheduled for Wednesday (May 22), Securities and Exchange Commission (SEC) Chairman Gary Gensler issued a statement condemning the Financial Innovation and Technology for the 21st Century Act (FIT 21).
O legislationsaid Gensler, “it would create new regulatory loopholes and undermine decades of precedent regarding oversight of investment contracts, placing investors and capital markets at immeasurable risk.”
He went on to list a number of problems with the bill. For example, he said he would remove blockchain-registered investment contracts from the legal definition of securities and the protections of most 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,” Gensler 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 a digital commodity.
“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.”
“The result could be that the vast majority of the market avoids even the limited SEC oversight envisioned by the bill for crypto asset securities.”
Introduced 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 that were initially offered as part of an investment contract and imposes requirements on entities that must be registered with the CFTC or SEC, according to the release.
The crypto sector has long sought more regulatory clarity of 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 merchandise or security and assign adequate oversight between the CFTC and the SEC.
Assuming the bill passes the House, many observers have noted that it does not have a clear path in the Senate and may not become law this year.
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