• The SEC Chair is against a bill that could weaken investor protections for crypto assets.
• The bill aims to shift oversight of crypto assets from the SEC to the CFTC.
• The SEC Chair is concerned the bill could create loopholes for malicious actors.

In a statement released on Wednesday, SEC Chair Gary Gensler has voiced strong opposition to the Financial Innovation and Technology for the 21st Century Act, commonly referred to as the FIT21 Act. As the U.S. House of Representatives prepares for a critical vote, Gensler highlighted significant concerns about the potential regulatory gaps the act could introduce, which he believes would undermine decades of investment oversight and put both investors and capital markets at risk. 

What’s in the FIT21 Act? 

The FIT21 Act, driven by the U.S. Republican Party, proposes a shift in regulatory authority from the Securities and Exchange Commission (SEC) to the Commodity Futures Trading Commission (CFTC). This move is intended to modernize the regulatory framework to better fit the unique characteristics of digital assets. The bill suggests that crypto firms could self-certify their products as “decentralized” or as belonging to a “special class” of “digital commodities,” thus potentially bypassing stringent SEC oversight.

Why Gary Gensler Criticizes the Bill? 

Gensler’s criticism is based on his belief that the FIT21 Act would require to remove the classification of crypto assets as investment contracts ultimately removing them from SEC oversight and weakening investor protection efforts. He argues that allowing crypto firms to self-certify could leave a significant portion of the crypto market unregulated due to limited SEC resources. 

This could also provide a loophole for entities seeking to avoid disclosures and regulations that safeguard against customer fund loss and theft. Gensler expressed concerns that this could impact the broader $100 trillion capital market creating an easy path for scammers involved in schemes like pump and dump or penny stocks. 

Prominent Figures Supporting the Bill

The FIT21 Act has gained support from various quarters, including 60 crypto organizations like Gemini, Kraken, and Coinbase. Additionally, influential political figures such as former U.S. President Donald Trump and current House Speaker Nancy Pelosi have shown support. Trump, in particular, has highlighted his interest by announcing the acceptance of campaign donations in cryptocurrency. 

Earlier this year during a lively discussion on CNBC, Gary engaged in a spirited debate with the network’s hosts about Bitcoin and its role in the financial world. As Bitcoin’s price climbed beyond $51,000 at that point in time, the discussion drew considerable attention with investors speculating on its future direction. Gensler’s remarks during the debate sparked significant controversy and discussion among viewers.

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