(Washington) The lower house of the United States Congress adopted on Wednesday a legal framework intended to regulate the cryptocurrency market, arousing enthusiasm from defenders of these assets, but fears of increasing potential risks for financial markets .
The law for “financial innovation and technology of 21e century” (or FIT21), supported by Republican elected officials in the House of Representatives, aims to share responsibility for the sector between the two main American agencies responsible for regulating financial markets, the SEC and the CFTC.
The CFTC would focus on decentralized assets, which is the case for the vast majority of cryptocurrencies, like bitcoin, while the SEC, whose mission is to protect small holders, would see its power weakened with its responsibility for cryptocurrencies which remain largely controlled by their creators.
“Impossible situation”
“The SEC and the CFTC are currently engaged in a tug-of-war for control of this asset class,” quipped Patrick McHenry, chairman of the Financial Services Committee of the House of Representatives.
“They have created an impossible situation in which the same companies are subject to competing and contradictory measures from two different agencies,” he lamented in a press release.
For defenders of cryptoassets, neither agency is really capable of controlling these markets, due to an approach that they consider outdated and unsuitable rules.
For Republican elected officials, FIT21 will strengthen supervision, while the use of cryptocurrencies has developed rapidly, with more transparency and accountability of the exchange platforms and the agents involved.
But SEC boss Gary Gensler is opposed to this text, which could have difficulty passing the Senate, with a Democratic majority.
In a press release, Mr. Gensler estimated that the law “will create new regulatory gaps and weaken several decades of know-how in the regulation of investment contracts, putting investors and financial markets at great risk.”
According to him, investment contracts recorded in the blockchain would no longer be considered securities, which would, in fact, remove them from SEC supervision and reduce investor protection.
“Bankruptcies, frauds and bankruptcy”
“The bankruptcies, frauds and bankruptcy recorded in this sector are not due to the absence of rules or due to obscure rules,” he added. “They happen because many people don’t follow the rules.”
“We should choose to protect investments rather than facilitate economic models that do not comply” with the rules, he argued.
With this law, companies in the sector could then self-certify investments and products in a particular category of “digital goods”, which would allow them to avoid SEC supervision, Mr. Gensler insisted.
Concerns brushed aside by elected French Hill, who heads the subcommittee responsible for digital assets: “Contrary to what some critics claim, this bill does not create a “slightly light” system for cryptocurrency crooks and does not prevent the SEC from controlling its markets.”
If it said it was ready to work with Congress to “guarantee a comprehensive and balanced regulatory framework for digital assets”, the administration of President Joe Biden opposes the proposed law, believing that it does not offer no “sufficient protections for consumers and investors”.
Around sixty companies, for their part, supported the bill, which also received the favor of Joe Biden’s Republican presidential rival, Donald Trump, who has also started to accept donations in cryptocurrencies.