SEC Chair Gary Gensler opposed the Financial Innovation and Technology for the 21st Century Act (FIT21) in a statement on Wednesday.
The bill, which has garnered support from key Republicans and major cryptocurrency firms, is scheduled for a vote in the House of Representatives, with its future in the Senate remaining uncertain.
Gensler’s critique centers on the risk that the bill could undermine the SEC’s ability to protect investors and the integrity of U.S. capital markets by altering the classification of crypto assets and diminishing regulatory oversight.
“[FIT 21] 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 said.
The FIT21 Act, introduced in July 2023, seeks to establish clear federal guidelines for digital asset markets and delineate the roles of the SEC and the Commodity Futures Trading Commission (CFTC) in cryptocurrency regulation.
Gensler said that the bill could erode the Howey test, a cornerstone in determining investment contracts, and allow crypto firms to circumvent SEC regulation by self-certifying their products as “decentralized” digital commodities.
Additionally, the FIT21 Act’s exclusion of crypto trading platforms from the definition of an exchange is seen by Gensler as a move that could undermine investor protection.
The White House also released a statement on Wednesday that opposes the passage of the bill.
“H.R. 4763 in its current form lacks sufficient protections for consumers and investors who engage in certain digital asset transactions,” the President’s Executive Office said on Wednesday.