According to a report by The Block, Gary Gensler, the Chairman of the U.S. Securities and Exchange Commission (SEC), expressed his opposition to the “21st Century Financial Innovation and Technology Act” (FIT21) in a statement released on Wednesday (22nd). He believes that this market structure bill will create new regulatory loopholes and undermine decades of precedent regarding the supervision of investment contracts, posing incalculable risks to investors and capital markets.
Gensler’s main argument is that the FIT21 bill disrupts the classification of cryptocurrencies as investment contracts, which would exempt these assets from SEC oversight and hinder investor protection efforts.
Gensler stated that FIT21 may allow cryptocurrency companies to self-label their cryptocurrency investments and products as “decentralized” and categorize them as a “special class” of “digital commodities,” thereby evading SEC scrutiny. Gensler expressed concerns that the agency’s ability to challenge these self-labeling claims would be limited due to resource constraints, potentially resulting in the vast majority of the cryptocurrency market going unregulated.
Gensler stated, “What happens if fraudsters running pump and dump schemes or penny stock promoters claim they are not subject to securities laws by touting themselves as cryptocurrency investment contracts or self-proclaiming they are decentralized systems?”
Gensler also stated that the bill would exclude cryptocurrency trading platforms from the definition of exchanges and remove established frameworks such as the Howey Test, ultimately exposing investors to risks.
The FIT21 bill, led by Republican lawmakers in the United States, takes a comprehensive approach to regulating the larger cryptocurrency ecosystem and aims to give more responsibility to the Commodity Futures Trading Commission (CFTC).
The House of Representatives plans to vote on the FIT21 bill later on Wednesday, with informed sources quoted by The American Prospect suggesting that former Speaker of the House Nancy Pelosi is considering voting in support of this cryptocurrency bill.
Related reports: “Foreign media: Democratic lawmakers will not be forced to vote against two cryptocurrency-related bills” and “Coinbase: The main catalyst for the upcoming cryptocurrency market may be driven by regulation.”
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