CFTC Will Set Crypto, SEC Chair Gary Gensler Imbas FIT21 Act

JAKARTA - The chairman of the US Securities and Exchange Commission (SEC), Gary Gensler, has publicly expressed his disapproval of the Financial Innovation and Technology for the 21st Century Act, or the FIT21 Act. This statement was made by Gensler on Wednesday, May 22.

FIT21 is a law that takes a comprehensive approach to regulating a larger crypto ecosystem and aims to give Commodity Futures Trading Commission (CFTC) more responsibility. Last week, 60 crypto organizations including Gemini, Kraken, Coinbase, and Digital Currency Group signed a letter of support for the bill, which says digital asset companies are currently bound by securities laws designed nearly 100 years ago.

As reported by The Block, Gensler emphasized that FIT21 will create new regulatory loopholes and undermine precedents for decades related to oversight of investment contracts, placing investors and capital markets at incomparable risk. According to him, the HR 4763 law underestimates the classification of crypto assets as an investment contract, which will remove them from SEC surveillance and hinder investor protection efforts.

Gensler argues that FIT21 could allow crypto companies to self-certification of their crypto investments and products as "decentralized" and be under "special classes" of "digital commodities" thus avoiding SEC surveillance. The SEC's ability to challenge this self-certification will be limited by resource constraints, potentially leaving most of the crypto market without regulation.

"This self-certification process does not only pose a risk to investor protection in the crypto space; it could damage the $100 trillion capital market (Rp1,600,000 trillion) by providing a way for those trying to avoid strict disclosures, bans on the loss and theft of customer funds, enforcement by the SEC, and the right to personal action for investors in federal courts," Gensler said.

He also added, "What if the perpetrators of the pump and dump scheme and stock driver Penny stated that they are outside the securities law by labeling themselves crypto investment contracts or self-certifying that they are a decentralized system?"

Gensler stated that the bill excluded crypto trading platforms from the exchange's definition and removed historically tested frameworks such as Howey's test, which would eventually harm investors.

On the other hand, Republican and former US President Donald Trump's presidential candidates, as well as his advisers, also support this crypto market structure bill. Trump recently stated that he would start accepting campaign donations in crypto form. The Speaker of the House of Representatives, Nancy Pelosi (D-CA), is also considering voting for the crypto bill, according to a report by The American Prospect on Tuesday.