- H.R. 4763, according to Gensler, would make it harder for the agency to regulate the sector.
- Gensler warned that the self-certification process could jeopardize investor protection.
In a statement issued on Wednesday, U.S. Securities and Exchange Commission Chair (SEC) Gary Gensler openly voiced his opposition to the FIT21 Act, also known as the Financial Innovation and Technology for the 21st Century Act.
Gensler stated:
“[FIT21] would create new regulatory gaps and undermine decades of precedent regarding the oversight of investment contracts, putting investors and capital markets at immeasurable risk.”
Jeopardize Investor Protection
H.R. 4763, according to the SEC chair, would make it harder for the agency to regulate cryptocurrency and other digital assets, since it would no longer be considered an investment contract. This, in turn, would make it harder to safeguard investors.
According to Gensler, FIT21 might pave the way for cryptocurrency companies to self-certify their investments and products as a “special class” of “digital commodities”—all in an effort to evade SEC oversight. Gensler warned that the agency’s lack of resources might render much of the cryptocurrency business uncontrolled because of its inability to question self-certifications.
Gensler warned that the self-certification process could jeopardize investor protection across all markets, not just crypto. He said that it could allow companies to avoid disclosure requirements, prohibitions on customer fund loss and theft, SEC enforcement, and private investor rights of action in federal courts.
The Chairman added:
“What if perpetrators of pump and dump schemes and penny stock pushers contend that they’re outside of the securities laws by labeling themselves as crypto investment contracts or self-certifying that they are decentralized systems?”
The head of the SEC expressed concern that investors would be placed at risk since the measure does not include cryptocurrency trading platforms as exchanges and does away with tried and proven procedures like the Howey test.
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