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SEC Urges Lawmakers to Reject New Crypto Bill, Citing Market Risks

By  |  May 22, 2024

The U.S. Securities and Exchange Commission (SEC) has strongly advised U.S. lawmakers against adopting a proposed bill that seeks to establish a new legal framework for digital currencies. The SEC’s warning came on Wednesday, just hours before the U.S. House of Representatives was set to consider the Financial Innovation and Technology for the 21st Century Act, a Republican-sponsored crypto bill.

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    The proposed legislation aims to clarify which federal agencies would have jurisdiction over various digital assets, a move that its proponents argue would promote industry growth by providing regulatory clarity. However, the SEC believes this shift would jeopardize existing legal standards and expose capital markets to significant risks.

    In a statement, SEC Chair Gary Gensler cautioned that the bill “would create new regulatory gaps and undermine decades of precedent regarding the oversight of investment contracts, putting investors and capital markets at immeasurable risk.” Gensler emphasized that under the proposed bill, investment contracts recorded on a blockchain would no longer be classified as securities, thereby stripping away critical investor protections currently guaranteed under securities laws.

    Read more: SEC Mandates Swift Response: Wall Street’s New Data Breach Rules Explained

    The bill, while gaining traction in the House, faces an uncertain future in the U.S. Senate. It arrives at a time when the SEC is expected to approve applications for spot ether exchange-traded funds, a move seen as a surprising boost to the digital currency sector. Despite this, Gensler has consistently argued that cryptocurrencies should be regulated under the same legal framework as other financial assets, especially in light of numerous high-profile fraud cases, bankruptcies and market failures within the crypto industry.

    Supporters of the bill, including various crypto advocates and industry organizations, have long criticized Gensler’s SEC for being a hindrance to broader adoption of digital currencies. They contend that the current regulatory environment stifles innovation and growth within the sector.

    As the debate continues, the future of the Financial Innovation and Technology for the 21st Century Act remains uncertain, with the SEC’s stark warnings adding another layer of complexity to the legislative process.

    Source: Reuters