SEC’s Gensler criticizes crypto regulation bill ahead of vote

SEC Chairman Gary Gensler opposed the Financial Innovation and Technology for the 21st Century Act (FIT21) in a statement on Wednesday.

The bill, which has the support of leading Republicans and major cryptocurrency companies, is scheduled for a vote in the House of Representatives, and its future in the Senate remains uncertain.

Gensler’s criticism focuses on the bill’s risk of undermining the SEC’s ability to protect investors and the integrity of the U.S. capital markets by changing the classification of crypto assets and reducing regulatory oversight.

“[FIT 21] “This would create new regulatory loopholes and undermine decades of precedent regarding the supervision of investment contracts, placing investors and capital markets at immeasurable risk,” Gensler said.

Introduced in July 2023, the FIT21 Act aims to establish clear federal rules for digital asset markets and define the roles of the SEC and the Commodity Futures Trading Commission (CFTC) in cryptocurrency regulation.

Gensler said the bill could erode the Howey test, the cornerstone of determining investment contracts, and allow crypto companies to bypass SEC regulations by self-certifying their products as “decentralized” digital commodities.

Additionally, the FIT21 Act’s exclusion of crypto trading platforms from the definition of exchanges is seen by Gensler as a move that could weaken investor protection.

The White House also issued a statement opposing passage of the bill on Wednesday.

“H.R. 4763, in its current form, lacks adequate protections for consumers and investors engaged in certain digital asset transactions,” the Executive Office of the President said in a statement Wednesday.