SEC’s Chair Gary Gensler Opposes FIT21 Bill for Weakening Securities Laws

• Gensler warns FIT21 could undermine decades of securities oversight and the Howey Test.
• FIT21 reclassifies some digital assets as “digital commodities,” risking investor protections.
• SEC Chair criticises FIT21’s 60-day review period for digital commodities as insufficient.

SEC Chair Gary Gensler has expressed scepticism over the Financial Innovation and Technology for the 21st Century Act (FIT21). He said that the measure will hurt investors and put the SEC’s supervision over the financial markets in danger. 

Read CRYPTONEWSLAND on google news

The bill seeks to make clear the roles that the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) play in regulating cryptocurrencies. It was supported by the House Agriculture Committee and the House Financial Services Committee.

Gensler warned that FIT21 would create regulatory gaps stating that redefining some digital assets as “digital commodities” within the CFTC’s jurisdiction could make decades of investment contract oversight vulnerable. 

He stressed that without sufficient disclosures, this shift might subject investors to unacceptably high risk. Furthermore, Gensler brought out the fact that FIT21 disregarded the Howey Test, a well-established Supreme Court rule that defines what qualifies as a security.

Effect on Market Oversight

The Chair of the SEC voiced worries that FIT21 would weaken the safeguards provided by US securities laws, which were intended to protect investors following the Great Depression. The bill proposes allowing companies to self-certify digital commodities, giving the SEC only 60 days to assess whether these assets meet the new definition.

Gensler argued that this timeframe is insufficient given the volume of digital assets in circulation. Moreover, Gensler criticised the bill’s definition of digital commodities, suggesting it fails to account for the economic realities of these assets. 

He warned that the bill’s framework for crypto investors and its exclusion of exchanges might increase risks to the American public. The potential for companies to circumvent SEC oversight by using decentralised networks could also jeopardise broader capital markets.

The House of Representatives is set to vote on FIT21 later on Wednesday. The SEC Chair’s criticisms of cryptocurrencies draw attention to the ongoing conflicts in the regulatory framework and the difficulties in striking a balance between investor protection and innovation.

Read Also:

• US House Democrats Not Whipped on Crucial Crypto Legislation
• CFTC Chair Clashes With SEC Chair, Says Ethereum Is a Commodity
• SEC Ditches ETH, Says Only BTC Is Commodity-Material
• South Korea’s Police Agency Strengthens Crypto Crime Crackdown
• Challenges SEC Chair Gary Gensler Faces in the Crypto Space- Expert Weighs In