New digital assets legislation is unfit to maintain investor protection, SEC chair warns

investmentnews.com:

Proposed new legislation that aims to address uncertainty and regulation of digital assets “by enforcement” was passed by the House of Representatives yesterday, but the SEC chair is concerned.

The Financial Innovation and Technology for the 21st Century Act, aka FIT21, may not be fit to maintain the level of investor protection that has been in place since federal securities laws were introduced 90 years ago when President Roosevelt and Congress established the SEC.

FIT21 passed with bipartisan support and advocates say that it will provide greater protection for investors while enabling innovation.

“FIT21 provides the regulatory clarity and robust consumer protections necessary for the digital asset ecosystem to thrive in the United States. The bill also ensures America leads the financial system of the future and remains a hub for technological innovation,” said Patrick McHenry (NC-10), who is chair of the House Financial Services Committee.

But Gary Gensler, chair of the SEC, warns that the key principles of securities law – such as requiring robust disclosures with liability for those whose material statements are untruthful and registration of firms – will not apply to many of those who offer cryptocurrencies and other digital assets, despite years of non-compliance and criminality by some.

“Many market participants in the crypto industry have shown their unwillingness to comply with applicable laws and regulations for more than a decade, variously arguing that the laws do not apply to them or that a new set of rules should be created and retroactively applied to them to excuse their past conduct. Widespread noncompliance has resulted in widespread fraud, bankruptcies, failures, and misconduct,” Gensler said in