On the 23rd, the U.S. House of Representatives passed the FIT21 cryptocurrency bill
According to Coindesk, the U.S. House of Representatives passed the 21st Century Financial Innovation and Technology Act with 279 votes in favor and 136 votes against, with the House Democrats performing strongly. The passage of the Crypto Market Structure Act marks the industry's most significant legislative achievement in Congress.
The digital asset legislation passed by the House of Representatives passes the cryptocurrency baton to the Senate, but the likelihood of decisive action in the Senate remains low.
Introduction
FIT21, known as the Financial Innovation and Technology for the 21st Century Act, aka FIT21, could make U.S. regulation of cryptocurrency clearer for everyone in the industry. If passed, the bill should:
- Providing a path for blockchain projects to launch safely and efficiently in the United States;
- Clarifying the lines between the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) regarding who regulates cryptocurrencies, and whether digital assets are securities or commodities;
- Ensure oversight of cryptocurrency exchanges and further protect American consumers by enforcing rules governing cryptocurrency transactions.
What's included?
FIT21/HR 4763 establishes a regulatory framework for the U.S. digital asset market to:
Defining the unique structural issues of digital assets;
Provide clear and strong consumer protections;
Clarify which digital assets are regulated by the Commodity Futures Trading Commission (CFTC) and which are regulated by the U.S. Securities and Exchange Commission (SEC).
- This is important because there are key differences between the definitions of “commodities” and “securities” which have implications for how they are regulated.
- The U.S. Commodity Futures Trading Commission (CFTC) will regulate digital assets as a commodity “if the blockchain or digital ledger on which it runs is functional and decentralized.”
- The SEC will regulate a digital asset as a security “if its associated blockchain is functional but not decentralized.”
The bill defines decentralization as, among other requirements, “no person has unilateral control over the blockchain or its use, and no issuer or associated person controls 20% or more of the digital assets or the voting power in the digital assets.”
The bill also imposes other consumer protection requirements, such as segregation of customer funds; lock-up periods for token insiders (to incentivize innovation rather than just speculation); annual sales volume limits; and disclosure requirements.
These measures are not dissimilar to the protective measures implemented by regulators after the stock market boom in the 1920s and the market crash of 1929 that brought the Great Depression. Once these regulations were in place, the United States ushered in an unprecedented era of growth and innovation in its markets and economy.
No content?
Some industry insiders have expressed concerns that the bill gives the SEC too much jurisdiction by providing a very high bar for decentralization and the ability to reclaim any token or project that “re-centralizes.” Still others are concerned that the bill does not provide a tighter line between SEC and CFTC jurisdiction.
However, the bill, while not perfect, will provide the crypto industry with the regulatory certainty it needs to continue operating and innovating in the United States.
Some people ask, why do we need regulation?
It is unrealistic to think that there is no regulation, and it is better to have more clarity than a confusing mess of rules. Regulation, and a clear path for companies to comply, allows innovators to build trust with the public and provide useful products to the public, while holding any bad actors more accountable.
Who is behind this?
The FIT21 Act is a joint effort of the House Financial Services Committee (which oversees the Securities and Exchange Commission) and the House Agriculture Committee (which oversees the Commodity Futures Trading Commission), with industry support. Last July, the bill passed the Financial Services Committee with the support of six Democrats and all Republicans on the committee, and also passed the Agriculture Committee by unanimous consent. Since then, the bill has continued to enjoy bipartisan support.
Why now, and what can you do to help?
A vote on the bill, set to take place in the coming weeks, will serve as a referendum on cryptocurrency in the United States.
Therefore, it is critical to ensure that the bill passes with strong bipartisan support. After that, it will also need to pass the Senate and be signed into law by the President. So, we are now at a critical juncture. To do your part, we urge you to contact your local representatives through the Stand with Crypto website.
Why is this important?
Although the crypto industry has been around for more than a decade, there is no comprehensive regulatory framework for digital assets in the United States. The current regulatory framework is fragmented, incomplete, and lacks clarity. This regulatory uncertainty not only creates a confusing environment for innovation, but also provides a breeding ground for bad actors. As we have seen, it is easy for companies and individuals with bad intentions to launch products that exploit regulatory gaps.
Meanwhile, responsible actors — legitimate entrepreneurs and startups — are subjected to dubious “enforcement-based regulation.” This approach hurts American innovation, especially as other countries continue to innovate, and is detrimental to the long-term dominance of the dollar, American consumers, and the overall development of the U.S. economy.
Startup activity often moves abroad when other jurisdictions offer suitable regulatory regimes. This is not an abstract concern: startups create jobs, economic value, and can grow into the next big tech company. For example, Amazon, Apple, Facebook, Google, Microsoft, Netflix, Nvidia, and Salesforce are all companies founded in the United States, some in the past 20 years alone. Today they not only dominate market value, but also profoundly affect our daily lives. FIT21 allows the crypto industry to have the same potential by creating an environment that supports innovation while avoiding a situation where a few large tech companies dominate the market and act as gatekeepers for the majority.
Whatever you think of cryptocurrency, it is more than just a financial opportunity; it represents a major technology platform shift, just as personal computers, cell phones, and the internet transformed our world.
Despite being one of the most important technological innovations in human history, the internet is failing the consumers, creators, and developers who rely on it today. Blockchain, cryptocurrencies, and Web3 can solve this problem in many ways: from proof of authenticity against deepfakes and identity verification against AI, to more voice and choice in social media platforms, to more inclusive payment systems, and more. But we need an enabling environment for these innovations to continue to thrive in the United States.
