Regulation
FIT 21 moves forward, with new cryptographic safeguards
The first major cryptocurrency regulation bill to pass the U.S. House passed this week with bipartisan support. But there is still a long way to go for the Financial Innovation and Technology for the 21st Century Act (FIT21) bill to become law.
The legislation installs the Commodity Futures Trading Commission (CFTC) as the primary regulator of digital assets in the United States. It would establish consumer protections for US crypto markets by imposing comprehensive disclosure requirements for issuers of digital assets.
It would also more clearly define what makes a crypto token a security or commodity. Under the legislation, the CFTC would regulate commodities and derivatives, while the Securities and Exchange Commission (SEC) would oversee digital assets classified as securities.
“The SEC and CFTC are currently engaged in a food fight for control over this asset class,” Rep. Patrick McHenry said (RN.C.), one of the main supporters of the bill. “They have created an impossible situation in which the same companies are subject to competing and contradictory enforcement actions by two different agencies. FIT21 solves this problem by creating a regulatory framework that will provide clear rules of the road and strong protections for Americans interacting with the digital asset ecosystem.”
The structure of FIT21 points to a new and productive path for the US cryptocurrency sector.
“The most important aspect of FIT21 is creating a coherent framework for how existing regulatory agencies divide the world of digital assets and cryptocurrencies,” he said James Wester, Director of Cryptocurrency at Javelin Strategy & Research. “Under the bill, the framework is based on how tokens are used rather than hard-to-define regulatory interpretations or opinions.
“Furthermore, creating a true registration regime, where participants know the rules for registration and have a pathway to comply, will help ensure that the good actors are separated from the bad ones,” he said.
What will be
FIT21 passed with 208 of 211 Republicans supporting the bill, while 71 Democrats voted yes and 133 voted against. Several prominent Democrats have spoken out in support, including the former House Speaker Nancy Pelosi. The next step is for the bill to pass the Senate, which is marginally controlled by Democrats, but only a couple of them would need to cross the aisle for the bill to pass. President Biden opposed the bill in an earlier statement, but did not indicate that he would veto it.
“This is another sign that our current cryptocurrency regulation is inadequate for the direction the technology is going, and that fixing these inadequacies is gaining bipartisan support,” Wester said. “This is good news if the United States wants to remain a leader as digital assets, cryptocurrencies and blockchain evolve. This is important in itself, but it is also crucial if we want to see regulations that provide real protections and safeguards.”