SEC’s Gensler criticizes bill regulating cryptocurrencies ahead of vote

Securities and Exchange Commission Chairman Gary Gensler. Photo: Kevin Dietsch via Getty Images.

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

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

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

“(FIT 21) would create new regulatory loopholes and undermine decades of precedent for the oversight of investment treaties, exposing investors and capital markets to immeasurable risks,” Gensler said.

The FIT21 Act, introduced in July 2023, aims to establish clear federal guidelines for digital asset markets and outline the role of the SEC and the Commodity Futures Trading Commission (CFTC) in regulating cryptocurrencies.

Gensler said the bill could undermine the Howey Test, a cornerstone of setting investment treaties, and allow crypto companies to circumvent SEC regulations by self-certifying their products as “decentralized” digital goods.

Additionally, Gensler sees the exclusion of cryptocurrency trading platforms under the FIT21 Act from the definition of an exchange as a move that could undermine investor protection.

On Wednesday, the White House also issued a statement opposing the bill’s adoption.

“HR 4763, in its current form, does not provide sufficient protections for consumers and investors who engage in certain transactions in digital assets” – Executive Office of the President he said on Wednesday.