As a seasoned crypto investor with a keen interest in regulatory matters, I share Gary Gensler’s concerns about the FIT21 Act. His strong opposition to this bill is not only valid but also crucial for preserving investor protection and maintaining market integrity.
Gary Gensler, the Chair of the U.S. Securities and Exchange Commission (SEC), has publicly voiced his firm objection to the Financial Innovation and Technology for the 21st Century Act or FIT21 Act in a statement issued on Wednesday. According to trusted reports, Gensler raised concerns that the legislation might result in substantial regulatory loopholes and jeopardize established principles governing the supervision of investment contracts.
Gensler’s Strong Opposition & Risks Highlighted
According to Gary Gensler’s perspective, the FIT21 Act could pose significant risks for investors and capital markets. He emphasized that this legislation would introduce new regulatory loopholes and weaken long-standing traditions regarding investment contract supervision. Consequently, investors and capital markets would be exposed to unquantifiable risks, as outlined in a recent post on X.
The point of contention for him regarding the FIT21 Act is the treatment of crypto assets as investment contracts. According to him, the bill, referred to as H.R. 4763, could take these assets out of the SEC’s jurisdiction, making it harder to safeguard investors. Gensler raised concerns that the legislation might let crypto companies self-approve their investments and label them “decentralized,” categorizing them as “digital commodities” instead.
As an analyst, I would put it this way: The self-certification process poses a significant risk to investor protection across all markets, not just crypto, totaling approximately $100 trillion. By enabling those looking to bypass stringent disclosures, prohibitions against customer fund loss and theft, SEC enforcement actions, and private investor lawsuits, this process could undermine the integrity of the entire financial system. Gensler strongly emphasized this concern.
Concerns Over Market Regulation and Potential Fraud
Additional concerns were raised by Gensler, who expressed the possibility that the FIT21 Act could be exploited by unscrupulous individuals. He cautioned that those involved in fraudulent practices like pump-and-dump and penny stock scams might mislabel their crypto transactions or claim their systems are decentralized to bypass securities regulations.
“Gensler raised the question, ‘How can individuals involved in pump-and-dump schemes and peddling of penny stocks argue that they’re exempt from securities regulations by categorizing their activities as crypto investment contracts or claiming they operate as decentralized systems?'”
He also raised concerns about the bill, specifically its omission of crypto trading platforms from the exchange definition and the elimination of established guidelines like the Howey test. According to him, these changes could potentially increase investor risks.
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2024-05-22 14:59