The bipartisan Responsible Financial Innovation Act would transfer some responsibility to the crypto sector from SEC to CFTC. Gary Gensler, chairman of the U.S. Securities and Exchange Commission, expressed concern that a proposed bill regarding cryptocurrency regulation could reduce consumer protections.
The bipartisan bill, Responsible Financial Innovation Act would clarify the roles of regulators with regard to cryptocurrency. It would also shift some responsibility from the SEC to the Commodity Futures Trading Commission.
Gensler stated that “we don’t want the protections we have within a $100 trillion capital markets,” when Gensler was asked about the bill.
The question of whether crypto tokens can be considered securities is the crux of the dilemma about which agency should control crypto.
The Responsible Financial Innovation Act
The bill was proposed by Senators Cynthia Lummis, Kirsten Gillibrand and aims to clarify this confusion. It relies on the Howey Test, which is a method that stems from a 1946 Supreme Court ruling.
It believes that cryptocurrency are “ancillary assets” which can be considered a commodity. However, the asset must not be a debt or give the holder a right of profit-sharing. This would mean that most tokens are now under the CFTC’s jurisdiction.
Gensler stated that the main goal of the SEC was to “continue protecting people in these basic bargains,” when it comes investing.
He suggested that cryptocurrency shares some commonalities with shares.
Gensler stated, “If you’re seeking money from the public the public is anticipating a profit due to your entrepreneurial or other efforts.” You must make clear disclosures to the public and not mislead them.
He suggested that the change could be a loophole for people who wish to avoid regulatory requirements.
“We don’t want our existing stock exchanges, mutual funds, or public companies to accidentally say, “You know what? I want to be noncompliant too.” “I want to be independent of this regime.”
He said that the Securities Act of 1933 had been “quite beneficial to investors” and that they have helped to drive economic growth for the past 90 years.
Although the Lummis-Gillibrand bill will not likely pass the current Congress’s floor, it could gain momentum after the midterm elections in November 2023.