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SEC Chairman Gary Gensler Warns Crypto Bill Poses Risks for Investors and Capital Markets
SEC Chairman Gary Gensler has expressed grave concerns about the potential impact of the Financial Innovation and Technology for the 21st Century Act (FIT21) on investors and the agency’s regulatory authority.
Gensler argued in a statement Wednesday that the proposed legislation would put investors and capital markets at immeasurable risk, creating new regulatory loopholes and undermining long-standing precedents regarding oversight of investment contracts.
Key points:
- FIT21 is a joint bill produced by the House Agriculture Committee and the House Financial Services Committee aimed at clarifying crypto oversight by the SEC and CFTC.
- The bill creates a “digital commodity” term for digital assets that do not meet the definition of a security, placing them under the purview of the CFTC.
- Gensler argues that FIT21 ignores long-standing precedents for regulating investment contracts and removes investor protections.
- The bill could allow investors to take excessive risks without adequate disclosures and potentially harm the broader U.S. capital markets.
According to Gensler, FIT21 disregards the well-established precedent set by the Supreme Court in the Howey Test. The test was used to determine whether an investment contract qualifies as a security.
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SEC Chairman’s Proposed Legislation Could Create Regulatory Gaps
Gensler also criticized the bill’s provision for companies to self-certify that they are issuing “digital goods.” He argued that the 60-day window given to the SEC to evaluate whether these assets meet the bill’s definition of a digital commodity is insufficient. This is due to the large number of digital assets in circulation.
Additionally, Gensler expressed concerns about how the bill defines a digital good. He stated that he ignores the economic realities of assets and the precedent set by the Howey Test.
Gensler warned that the bill’s investor protection framework and exclusion from exchanges could increase risk to the American public.
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The SEC chairman also warned that FIT21 could have unintended consequences for the broader US capital markets. This is because it could allow companies to avoid SEC oversight by using decentralized networks.
Gensler’s comments come as the House of Representatives prepares to vote on the FIT21 bill later this Wednesday. However, the legislation faces an uncertain future in the Senate and is unlikely to become law this year.
Vignesh Karunanidhi
Vignesh Karunanidhi
Writer of Estrada do Leite
Vignesh is a seasoned professional in the crypto space since 2017. He has been writing for over 6 years and specializes in writing and editing various types of crypto content including news articles, long-form pieces, and blog posts, all focused on sharing. the beauty of blockchain and cryptography.