SEC Chair Gary Gensler has publicly voiced his opposition to the Financial Innovation and Technology for the 21st Century Act, or FIT21 Act, arguing that it would create regulatory gaps and jeopardize investor protection efforts. In his statement released on Wednesday, Gensler highlighted concerns that the act undermines the classification of crypto assets as investment contracts, potentially removing them from SEC oversight.

According to Gensler, FIT21 could enable crypto firms to self-certify their investments and products as "decentralized" digital commodities, allowing them to evade SEC scrutiny. He cautioned that this self-certification process could limit the SEC's ability to challenge such designations, leaving a significant portion of the crypto market unregulated.

Gensler emphasized the risk to investor protection, suggesting that the bill's provisions could provide a loophole for fraudulent schemes and undermine the integrity of capital markets. He criticized the exclusion of crypto trading platforms from the definition of an exchange and the elimination of established frameworks like the Howey test, which could expose investors to greater risks.

FIT21, spearheaded by the U.S. Republican Party, aims to overhaul regulations governing the crypto ecosystem and allocate more regulatory responsibility to the Commodity Futures Trading Commission. Despite opposition from Gensler and some Democrats, the bill has garnered support from 60 crypto organizations, including major industry players like Gemini, Kraken, and Coinbase.

Former President Donald Trump and his advisors reportedly endorse the bill, with Trump even expressing a willingness to accept campaign donations in crypto. House Speaker Nancy Pelosi is also considering supporting the bill, signaling bipartisan interest in addressing regulatory challenges in the crypto space.

As the U.S. House of Representatives prepares to vote on FIT21, Gensler reiterated the need for robust regulatory oversight in the crypto industry, emphasizing the importance of enforcing existing rules to prevent fraud and protect investors.