The US House of Representatives is preparing to vote on the decentralization bill

Last updated: May 21, 2024 1:39 pm EDT | 2 minute read

This week the US House of Representatives will vote on the long-awaited decentralization bill, officially titled “The Financial Innovation and Technology for the 21st Century Act” (FIT21). Experts believe this legislation could clarify and simplify cryptocurrency regulation for traders and investors in the United States.

The US Decentralization Law Will Provide Clarity to Blockchain Projects

THE United States Decentralization Act (H.R. 4763) is expected to be voted on in the House this week. Despite a tough battle in the Senate and the possibility of a presidential veto, the initiative represents the most important milestone in creating a comprehensive US regulatory framework for digital assets.

The organizing principle of the bill is to clearly define the regulatory responsibilities of the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) in regulating crypto transactions.

The division of responsibilities depends on several factors, such as the decentralization and functionality of the blockchain system associated with the digital asset, how the asset was acquired, and the holders of the digital asset.

These factors determine whether a digital asset is classified as a “restricted digital asset” subject to SEC rules or as a “digital commodity” under the jurisdiction of the CFTC.

FIT21 aims to regulate digital assets from their inception. Before a functional system exists, SEC-style disclosure-based regulations would apply to transactions such as ICOs.

Potential buyers would receive information to evaluate unproven digital assets.

Meanwhile, the The Blockchain Association has called for a Housewide vote on the U.S. Decentralization Bill in a letter to House Speaker Mike Johnson and Minority Leader Hakeem Jeffries on May 20.

The letter, signed by major crypto firms including Ripple, Kraken, and Circle, highlights the need for legislation that offers a framework for innovation, regulatory clarity for US operators, and protection for users and consumers.

“We, the undersigned, write today to express our support for a floor vote on H.R. 4763, the Financial Innovation and Technology for the 21st Century Act (FIT21),” the letter reads. “The undersigned represent the diverse blockchain and digital asset industry – including technology startups, small business services companies, infrastructure providers, regulated institutions and investors – working together to support a pro-innovation national policy and regulatory framework. “

The US Decentralization Act allows for the issuance of US SEC certification

In addition to dividing regulatory responsibilities, the US decentralization bill establishes a certification process for blockchain systems to be treated as decentralized entities. Once certified, the digital asset becomes a “digital commodity,” exempt from SEC regulation.

At this point, the regulatory framework shifts towards CFTC-style standards of conduct. As a digital commodity, laypeople can trade it freely on CFTC-regulated digital commodity exchanges and through CFTC-regulated spot transactions. Insiders also gain greater flexibility when transacting in the digital asset, although some restrictions may still apply to specific insiders, such as issuers.

If the FIT21 Act passes, it will bring much-needed clarity to crypto regulations in the United States. The SEC enforced the rules without clear guidelines, causing uncertainty and tension in the industry. The financial watchdog has clashed with every major crypto operator in the country, reporting unlicensed operations and unregistered securities offerings.

Let’s remember that the The SEC has filed a lawsuit against Coinbase in June 2023 for allegedly operating as an unregistered stock exchange, broker-dealer and clearing agency. The exchange had, in turn, sued the SEC for refusing to regulate cryptocurrencies due to its constant crackdown on crypto companies. This also resulted Coinbase Chief Legal Officer Paul Grewal rallies major exchanges to question SEC actionswhich can have serious implications for the cryptocurrency industry.

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