The discussion for cryptocurrency is getting hotter as the elections draw nearer, and SEC chairman Gary Gensler expresses his apprehension about FIT21. This new legislative document is set to be tabled before U.S. House Representatives tomorrow. Gensler heavily faults FIT21, saying that if implemented, it will sideline SEC and hurt the $100 trillion capital markets and not only the crypto-community.”
Opposition to the Financial Innovation and Technology for the 21st Century Act
Gary Gensler, the chairman of the U.S. Securities and Exchange Commission (SEC), shared his disapproval of the “Financial Innovation and Technology for the 21st Century Act”, also known as FIT21. He stated that the bill was likely to be presented to the House and that if enacted, it would result in disjointed investment contracts’ regulation. Gensler thinks that FIT21 would interfere with numerous years of established structures and could create severe regulatory vacuums. This, in turn, could impact both investors and the availability of capital in an adverse manner.
Potential Impact on Crypto Regulation
Gensler said that deleting the status of investment contracts from cryptocurrencies would effectively take the SEC out of the regulatory picture hence threatening investors. Gensler sheds light on FIT21 which enables cryptocurrency firms to tag their financing as electronic goods thus dodging regulation by the SEC; through this process, most parts of the cryptocurrency market would have no regulations. The SEC would take a lot of time and resources to deal with these changes. Due to this, the bill would mean that an entire section of the cryptocurrency industry remains unprotected, therefore giving room for more chances of risks to befall investors.
Risks to Broader Capital Markets
The proposed laws have effects on all companies involved with cryptocurrencies. In an interview, the head of the SEC claimed that if it passes, the bill would affect the entire $100 trillion capital markets too. This way, traditional market investors would face big dangers because businesses can choose their ways of investing under this policy too. Further, this opens a way to escape from tight control for some people. He said that the government would weaken the SEC’s authority to protect clients’ money and investors’ data in federal courts.
Redefining Crypto Platforms
Gensler mentioned that if FIT21 becomes law, digital asset trading platforms cannot fall under the term “exchange.” Past measures, such as the Howey test, aim to prevent this. This move may render many safeguards irrelevant, making it unsafe for investors. It would actively transfer significant regulations governing this space to CFTC jurisdiction and gain the support of Republican congressmen.
Legislative Support and Industry Backing
Gemini, Kraken, Coinbase, and DCG signed a letter in support of the proposed bill from over 60 organizations. The former President, Donald Trump, who has announced to contest in the upcoming election has notably expressed his support for the same legislation.
Previous Legislative Actions
The following message is a result of the recently approved legislative law passed by the House meant to abolish SAB 121, an SEC rule dated back to March 2022. Nevertheless, The White House has raised fears over possible dangers associated with this approval, thus suggesting that it is improbable if at all that President Biden will give his assent by signing the same. It is worth noting that the current discussion illuminates some major legal and political obstacles surrounding the cryptocurrency industry as well as its supervision.
To sum up, Gary Gensler’s intense resistance against the FIT21 legislation highlights the dangers and issues it poses that would impact both the fast-growing world of cryptocurrencies as well as the more established capital markets made over many years, alongside investor protection.
