The head of the SEC says new cryptocurrency legislation will undermine his agency’s work.
Hours before a scheduled vote Wednesday (May 22), Securities and Exchange Commission (SEC) Chair Gary Gensler issued a statement decrying 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 regarding the oversight of investment contracts, putting investors and capital markets at immeasurable risk.”
He went on to list a litany of problems with the bill. For example, he said it would remove blockchain-recorded investment contracts from the statutory definition of securities and the protections of most federal securities laws.
“Further, by removing this set of investment contracts from the statutory 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 being offered and sold as securities under existing law,” Gensler added.
The bill would let companies self-certify that they’re issuing “digital commodities” and also gives the SEC 60 days to determine if those assets fit the bill’s definition of digital commodity.
“There are more than 16,000 crypto assets that currently exist. Given limits on staff resources, and no new resources provided by the bill, it is implausible that the SEC could review and challenge more than a fraction of those assets,” the chair said.
“The result could be that the vast majority of the market might avoid even limited SEC oversight envisioned by the bill for crypto asset securities.”
Introduced last summer, FIT21 establishes federal requirements over digital assets, giving the Commodity Futures Trading Commission (CFTC) new jurisdiction over digital commodities and clarifying the SEC’s role in governing over digital assets as part of an investment contract.
The bill also establishes a process for permitting the secondary market trading of digital commodities that were initially offered as part of an investment contract and imposes requirements on entities required to be registered with the CFTC or the SEC, per the release.
The crypto sector has long been seeking more regulatory clarity from Washington, and this bill helped the industry reach that goal, PYMNTS reported when the bill was introduced.
FIT21 would determine when a cryptocurrency is a commodity or security and assign oversight appropriately between the CFTC and the SEC.
Assuming the bill makes it through the House, many observers have noted it doesn’t have a clear path in the Senate, and that it may not become law this year.
