United States Securities and Exchange Commission (SEC) Chair Gary Gensler released a statement Wednesday morning criticizing the Financial Innovation and Technology for the 21st Century Act (FIT21) ahead of the crypto regulation’s expected vote in the House today.
SEC Chair Gary Gensler Pushes Back On FIT21 Before House Vote
In a blog post published on the SEC’s website Wednesday, Gensler claimed the bill would in part “create new regulatory gaps and undermine decades of precedent regarding the oversight of investment contracts,” ultimately “putting investors and capital markets at immeasurable risk.”
In particular, the federal regulator argued that FIT21 would work against already established securities law by negating the long-accepted Howey Test while reneging current regulations on investment contracts, allowing crypto operators to “self-certify” their products.
“The crypto industry’s record of failures, frauds, and bankruptcies is not because we don’t have rules or because the rules are unclear. It’s because many players in the crypto industry don’t play by the rules,” Gensler continued.
“We should make the policy choice to protect the investing public over facilitating business models of non-compliant firms.”
Crypto Regulations Finally See Traction On Capitol Hill
Gensler’s commentary comes amidst a wave of momentum for crypto regulation on Capitol Hill, signaling potential pushback from U.S. lawmakers over the SEC’s current regulatory regimen towards digital assets.
Earlier this month, both chambers of Congress voted on a resolution that would effectively overturn the SEC’s controversial crypto accounting guidance known as SAB121.
In a statement shortly following the vote disavowing SAB121, pro-crypto Senator Cynthia Lummis (R-WY) claimed it was “a win for financial innovation and a clear rebuke of the way the Biden admin and Gary Gensler have persecuted crypto.”
Gensler has long ruffled the feathers of key players in the crypto space, with the federal agency doling a swath of litigation to digital asset organizations for allegedly breaking U.S. securities law.
Meanwhile, Ripple’s Chief Legal Officer Stuart Alderoty, the blockchain firm currently locked in a contentious legal battle with the SEC over the sale of cryptocurrency XRP, took to X early on Wednesday to criticize Gensler’s leadership of the SEC.
Gensler overplayed his hand. He thought crypto was an easy target. He relished being the guy that everyone loved to hate. He thought he was above Congressional oversight. That’s all gone. He’s now a struggling political liability. https://t.co/Uy6Mwed6hJ
— Stuart Alderoty (@s_alderoty) May 22, 2024
“Gensler overplayed his hand. He thought crypto was an easy target,” Alderoty wrote. “He relished being the guy that everyone loved to hate. He thought he was above Congressional oversight. That’s all gone. He’s now a struggling political liability.”
Should U.S. lawmakers advance FIT21, it would mark the U.S. government’s first successful push for a crypto regulatory framework and a strong reprimand of Gensler’s treatment of digital assets.
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