A group of Republican lawmakers are seeking answers from Treasury Secretary Janet Yellen on the Financial Stability Oversight Council (FSOC) efforts related to the spot market for digital assets.
The Republican lawmakers said regulators have failed to facilitate an environment that ensures consumer protection and fosters digital asset innovation in the United States.
They added that the bipartisan Financial Innovation and Technology Act for the 21st Century (FIT) would provide federal regulators with clear authority over the digital asset spot markets. It would also ensure the customer protections seen in the current financial regulatory structure apply to intermediaries and digital asset-related activities. Overall, they say the act would provide the clarity and certainty that digital asset spot markets desperately need.
“In 2021, Securities and Exchange Commission (SEC) Chair Gensler identified some of these same gaps as it relates to trading platforms, specifically stating, ‘I think it’s only Congress that could really address it, it’d be good to consider – if it was – if you asked my thoughts, to consider whether to bring greater investor protection to the crypto exchanges.’ The same week, Chair Gensler emphasized, ‘while the [SEC’s] sister agency, the Commodity Futures Trading Commission (CFTC), has some limited anti-fraud and anti-manipulation authority, there is no federal authority to actually bring a regime to the crypto exchanges… [the SEC] will be working with Congress, if they see fit to try to bring some protection for people who want to invest in this asset class,’” they wrote in a letter to Yellen, in her capacity as the chair of FSOC.
The letter was penned by Rep. Glenn Thompson (R-PA), chairman of the House Committee on Agriculture, Rep. Patrick McHenry (R-NC), chairman of the House Financial Services Committee; Rep. French Hill (R-AR), chairman of the Digital Assets, Financial Technology and Inclusion Subcommittee; and Rep. Dusty Johnson (R-AL), chairman of the Commodity Markets, Digital Assets, and Rural Development Subcommittee.
They added that the need for federal legislation over cash market digital assets is more critical than ever and their committees worked on the FIT bill to address these gaps.
“In doing so, the Committees engaged with several members of FSOC for feedback. The legislation provides the CFTC with jurisdiction over non-security digital asset spot markets and clarifies the SEC’s jurisdiction over digital assets offered as part of an investment contract. Most importantly, FIT21 imposes robust customer protections on all entities required to be registered with the SEC and CFTC. Over a year after the collapse of several digital asset firms and the associated customer losses, digital asset firms continue to operate despite the ongoing gaps in federal oversight. FIT21 provides comprehensive oversight of the spot market for digital assets that are not securities, and closes the gaps repeatedly identified by FSOC, they concluded.
They asked Yellen to respond to a series of questions by Feb. 20.