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Gary Gensler, Chair of the United States Securities and Exchange Commission (SEC), issued a statement on Wednesday morning expressing his disapproval of the Financial Innovation and Technology for the 21st Century Act (FIT21) ahead of the anticipated vote on crypto regulation in the House today.
SEC Chair Gary Gensler Critiques FIT21 Before House Vote
In a blog entry shared on the SEC’s website on Wednesday, Gensler asserted that the legislation would partially “create new regulatory gaps and undermine decades of precedent concerning the oversight of investment contracts,” ultimately “placing investors and capital markets at immeasurable risk.”
The federal regulator specifically contended that FIT21 would contradict established securities law by invalidating the long-accepted Howey Test while reversing current regulations on investment contracts, permitting crypto operators to “self-certify” their offerings.
“The crypto sector’s history of failures, frauds, and bankruptcies is not due to a lack of rules or because the rules are ambiguous. It’s because numerous participants in the crypto sector do not adhere to the rules,” Gensler added.
“We should make the policy choice to protect the investing public over facilitating business models of non-compliant firms.”
Crypto Regulations Gain Momentum On Capitol Hill
Gensler’s remarks come amid a surge of momentum for crypto regulation on Capitol Hill, indicating potential resistance from U.S. lawmakers regarding the SEC’s current regulatory approach to digital assets.
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Earlier this month, both houses of Congress voted on a resolution that would effectively nullify the SEC’s contentious crypto accounting guidance known as SAB121.
In a statement shortly after the vote rejecting SAB121, pro-crypto Senator Cynthia Lummis (R-WY) described it as “a win for financial innovation and a clear rebuke of the manner in which the Biden administration and Gary Gensler have targeted crypto.”
Gensler has consistently caused friction with significant figures in the crypto industry, with the federal agency pursuing a range of litigation against digital asset firms for allegedly violating U.S. securities law.
Meanwhile, Ripple’s Chief Legal Officer Stuart Alderoty, whose blockchain company is currently engaged in a contentious legal dispute 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 stated. “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.”
If U.S. lawmakers proceed with FIT21, it would represent the first successful initiative by the U.S. government for a crypto regulatory framework and a significant rebuke of Gensler’s approach to digital assets.
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