Crypto Turmoil: Biden and Gensler Tackle FIT21 Bill

President Joe Biden has expressed his opposition to the FIT21 crypto regulation bill just hours before a decisive vote in the House of Representatives. This comes after sharp criticism from SEC Chairman Gary Gensler against the bill.

Biden’s Opposition and Gensler’s Warnings

The White House has announced its opposition to the FIT21 bill, believing it does not provide sufficient protections for consumers and investors in the crypto field. This position echoes the concerns expressed by Gary Gensler, the Chairman of the Securities and Exchange Commission (SEC).

In a letter, Mr. Gensler warned that the adoption of new rules to regulate crypto could weaken American financial markets and deprive investors of essential information, exposing them to “immeasurable risks.”

He particularly lamented that the bill excludes investment contracts from the legal definition of a security, a telling change according to him.

Mr. Gensler stressed that many cryptos are offered and sold as securities under existing law, a reality that market participants have tried to deny, but which courts have confirmed repeatedly.

He also pointed out the decentralization of cryptos, which would allow project issuers to self-certify assets as “digital commodities,” leaving little time for the SEC to review and contest these certifications.

Risks for Crypto Investors and a Changing Political Context

According to Mr. Gensler, excluding crypto exchange platforms like Coinbase from the definition of an exchange would endanger investors, as these companies could potentially commingle funds or bet against their clients, among other conflicts of interest.

He warned against allowing companies to choose the regulatory regimes to which they are subjected, fearing that unscrupulous actors might seek out a “light-touch” framework.

Mr. Gensler’s warning comes in a changing political context on Capitol Hill. The crypto adoption by former president Donald Trump, whose campaign now accepts crypto donations, seems to be a motivating force behind the urgency to adopt new rules in this field.

Lawmakers have recently voted to remove SEC rules regarding the custody of cryptos, which limit banks’ ability to safeguard these assets.

Despite the bipartisan support for the FIT21 bill, the opposition from the White House and the warnings from SEC Chairman Gary Gensler raise serious questions about investor protection and financial market stability. The House of Representatives’ vote, expected this Wednesday, will be crucial for the future of crypto regulation in the United States.