Gary Gensler has made a public statement expressing his opposition to the Financial Innovation and Technology for the 21st Century Act, also known as the FIT21 bill. He raised concerns about how the bill could create new regulatory loopholes and undermine established practices for overseeing investment contracts, potentially putting investors and capital markets in jeopardy.
The FIT21 bill, developed by the House Agriculture Committee and the House Financial Services Committee, aims to provide clarity on how the SEC categorizes cryptocurrencies by introducing a new term, “digital commodity,” for digital assets.
Gensler outlined seven main concerns with the bill, particularly focusing on the exclusion of investment contracts stored on the blockchain from the protection of federal securities laws. He argued that this exclusion could expose investors to risks. Additionally, the bill suggests a process for crypto contracts to become “decentralized,” removing them from SEC oversight and allowing companies to self-certify that they are issuing “digital commodities,” with a 60-day window for SEC approval.
Gensler emphasized that more than 60 days would be necessary for the SEC to effectively regulate the vast number of existing crypto assets. He warned that the bill could harm U.S. capital markets by enabling questionable investors and companies to evade SEC oversight by claiming to be decentralized networks.
The House of Representatives is expected to vote on the bill later in the week.
In response to Gensler’s statement, Alexander Grieve of Paradigm pointed out the ambiguity of whether Gensler’s views represent his personal opinion or the official stance of the SEC. Matthew Graham of Ryze Labs criticized the SEC’s potential decision on an Ethereum ETF as politically motivated and questioned Gensler’s credibility. Congressman Wiley Nickel humorously acknowledged Gensler’s point about outdated securities laws.
If the FIT21 bill is approved by the House, it will move to the Senate for consideration and is unlikely to become law until the end of the year.