The US securities regulator on Wednesday urged the legislature not to pass a bill aimed at creating a new legal framework for digital currencies, saying it would break existing legal precedents and expose the capital market to “immeasurable risks.”
The US House of Representatives is expected to review the “21st Century Financial Innovation and Technology Act” initiated by the Republican Party later on Wednesday, which will determine to some extent which agencies have jurisdiction over which digital assets. Supporters of the bill in Congress say it will provide regulatory clarity and help boost the industry.
The legislation is facing an uncertain fate in the US Senate, but at the same time, the US Securities and Exchange Commission (SEC) said it could give an unexpected boost to the industry by approving applications for spot Ether ETFs.
But US Securities and Exchange Commission Chairman Gary Gensler said in a statement that the bill “will create a new regulatory gap, break decades of precedent relating to investment contract supervision, and expose investors and capital markets to immeasurable risks.”
The bill was supported by cryptocurrency supporters and industry groups, who have long viewed the SEC's Gensler as an obstacle to the wider application of digital assets.
Gensler noted high-profile lawsuits, fraud cases, bankruptcies, and failures, and insisted that cryptocurrencies should be subject to the same laws as any other asset.
In a statement on Wednesday, he said that under the bill, investment contracts recorded on the blockchain will no longer be treated as securities, thereby depriving relevant investors of the protection they receive under the securities law.
In addition to other criticisms, Gensler said the bill would allow issuers of cryptocurrency investment contracts to prove that their products are digital goods not regulated by the SEC, so the agency only has 60 days to question this.