Gary Gensler Criticizes FIT21 Bill as Regulatory Threat

Gary Gensler, Chairman of the U.S. Securities and Exchange Commission (SEC), voiced opposition to the FIT21 bill just hours before a vote. This was reported by CoinDesk.

“[The document] would create new regulatory gaps and dismantle decades of precedent regarding oversight of investment contracts, exposing investors and capital markets to immeasurable risk,” he stated.

FIT21 (or H.R. 4763) is a joint bill developed by the House Agriculture Committee and the House Financial Services Committee, aimed at clarifying the authority of the SEC and the Commodity Futures Trading Commission (CFTC) over the crypto market.

The proposal introduces the term “digital commodity” for assets that do not meet the definition of a security, placing these assets under the CFTC’s jurisdiction.

According to Gensler, FIT21 disregards longstanding precedent in regulating investment contracts, puts the agency in a difficult position when certifying self-proclaimed digital commodity issuers, ignores the Howey Test, and potentially allows investors to take on excessive risk without appropriate disclosure.

U.S. securities laws were designed post-Great Depression to protect consumers by compelling companies to disclose information, the official believes. He added that participants in the crypto industry are unwilling to comply with these rules.

“The bill would exclude blockchain investment contracts from the statutory definition of securities and the time-tested protections provided by most federal laws,” the SEC chief expressed concern.

The initiative requires companies to self-certify the issuance of “digital commodities” and gives the SEC 60 days to assess compliance with this definition. Gensler argues that this timeframe is insufficient, given the number of assets in circulation.

The Chairman also fears that FIT21 could harm broader U.S. capital markets by allowing companies to evade oversight using “a sort of decentralized network.”

The House of Representatives will vote on the document on May 22. Following this, the bill must receive Senate approval.

On May 16, U.S. authorities passed a resolution nullifying the SEC’s Staff Accounting Bulletin 121.

Previously, Uniswap founder Hayden Adams stated that the “all-out war” on the industry led by the regulator and Senator Elizabeth Warren is a major misstep by President Joe Biden’s administration.