The United States House of Representatives voted 279-136 to approve the Financial Innovation and Technology for the 21st Century Act with a wave of Democratic support.
If it becomes law, the bill could have sweeping ramifications on the US regulatory landscape for digital assets, marking the crypto industry’s most significant legislative accomplishment in Congress.
House Of Representatives Approves FIT21
Looking at the numbers, 208 Republican House members voted in favor of the bill. However, the bill saw a wave of support from Democrats as well, with 71 Democrats voting in favor. All but three Republican House members voted in favor of FIT21, while nearly a third of Democrats supported it. The bipartisan push highlights the changing attitude toward crypto on Capitol Hill. Only last week, the House and Senate passed a measure rolling back crypto custody rules for banks in the United States from the United States Securities and Exchange Commission. It also received support from prominent lawmakers, including Senate Majority Leader Chuck Schumer (D-NY).
The FIT21 bill is the first time a major crypto-related bill has cleared Congress and now heads to the US Senate. However, what happens in the Senate is anyone’s guess, as there is no counterpart bill, and support remains unclear. Additionally, the committees have not done the required level of work on crypto. Despite the win, the US has fallen considerably behind when it comes to establishing crypto regulations.
A Comprehensive Framework
The bill creates a comprehensive federal framework for regulating digital assets and establishes jurisdiction between the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission. This, along with other initiatives, gives issuers the ability to self-certify assets as commodities.
The bill curtails the SEC’s regulatory remit, giving the CFTC exclusive regulatory authority over digital asset commodities. It provides the criteria for determining the status based on a project’s level of decentralization, token supply and who it is owned by, and the blockchain’s susceptibility to influence by a single party. One of the bill’s co-sponsors, House Financial Services Committee (HSFC) Chairman Patrick McHenry (R-SC), stated,
“The SEC and the CFTC are currently in a food fight for control of this asset class class. They’ve created an impossible situation where the same firms are subject to competing and contradictory enforcement actions by the two different agencies, leaving consumers behind, leaving innovators behind. FIT21 fixes this.”
President Biden, Gensler Skewer Bill
SEC Chair Gary Gensler was vocal about his opposition to the bill, stating that it would remove so-called investment contracts from the statutory definition of a security. The SEC has, on multiple occasions, stated that many tokens resemble securities because investors allocate money to them, expecting profits from the efforts of others.
“The bill implies what courts have repeatedly ruled—but what crypto market participants have attempted to deny—that many crypto assets are being offered and sold as securities under existing law.”
President Joe Biden is also opposed to FIT21 and has stated on previous occasions that he would veto a bill that erases rules from the Securities and Exchange Commission on crypto custody for banks. However, while that bill has passed the House and the Senate, Biden has yet to veto it. Biden also called out the lack of sufficient investor protections and called for a comprehensive and balanced regulatory framework. Several Democrats were also critical of the bill, with Rep. Maxine Waters stating,
“This bill still provides major exemptions from critical securities laws.”
She also said that crypto companies are refusing to register, and the bill would give them the opportunity to operate without regulatory oversight. Brad Sherman (D-CA) stated that any changes to the definition of a security would act as a “dagger at the hundred trillion dollar markets that power our economy.”
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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