Regulation
US House Passes Sweeping Cryptocurrency Bill FIT21 – DL News
- The cryptocurrency regulation bill passed by a bipartisan vote in the US House.
- The FIT21 bill promises to give commodities regulators greater oversight over digital assets.
- The bill may not advance to the next stage in the Senate.
- President Joe Biden does not support the bill but has said he will not veto it.
The US House of Representatives has voted to pass a landmark cryptocurrency bill as digital assets become a political talking point just months before a presidential election.
The Republican-led Financial Innovation and Technology for the 21st Century Act, known as the FIT21 Act, passed by a bipartisan vote of 279 to 136.
Specifically, 71 Democrats supported the bill, including former House Speaker Nancy Pelosi. Another 133 voted in opposition.
Among Republicans, only three voted in opposition. Another 208 supported the bill.
FIT21 promises to establish clear rules for digital assets long sought after by the cryptocurrency industry.
Hours before the vote, the Biden administration said it opposed the bill but did not threaten a veto — a relief for the industry.
The bill would end the “food fight for control” of cryptocurrencies being fought between the Securities and Exchange Commission and the Commodity Futures Trading Commission, said Republican Rep. Patrick McHenry of North Carolina, a co-sponsor of the bill, and chairman of the House Financial Services Committee.
“This is the most important moment in cryptocurrency policy and legislation in U.S. history so far,” said Rashan Colbert, head of policy at open source software developer and decentralized trading platform dYdX Trading. DL News.
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Senate challenge ahead
The FIT21 bill will then have to pass through the Senate. Upcoming elections mean priorities may change.
“There is a decent chance that progress will stop after this vote, but that doesn’t mean this is a futile exercise,” said Colbert, a former U.S. Senate staffer.
The progress is important symbolically, Colbert said, and demonstrates political will to regulate the digital asset market. He also creates a baseline for bipartisan agreement on how to regulate cryptocurrencies.
And even if the bill doesn’t pass in its current form, its provisions could be incorporated into other laws.
What’s in the bill
The bill is tailored to digital assets and offers an unprecedented framework for the sector. It passed the House Financial Services and Agriculture Committees in July with bipartisan support.
FIT21 establishes definitions for cryptocurrencies and divides responsibility between the Commodity Futures Trading Commission and the Securities and Exchange Commission.
The rules would give the CFTC, which is considered more industry-friendly, more jurisdiction over the sector. The definitions determine whether an asset will be subject to SEC or CFTC oversight.
Decentralized finance is outside the scope of the bill.
The rules would provide a “greater level of comfort knowing that we have the explicit authority to continue doing what we’re doing, which is really all they want right now,” Colbert said.
The vote comes on the heels of another political victory for cryptocurrencies. Last week, the U.S. House and Senate voted to repeal the SEC’s controversial accounting guidelines SAB121.
At the same time, the industry is anticipating regulatory approval of Ethereum spot exchange-traded funds.
More negative reaction
The White House he wrote in a memo on Wednesday it said the bill “in its current form does not have sufficient protections for consumers and investors who engage in certain digital asset transactions.”
But most notably, the White House has said it will work on developing a regulatory framework for digital assets with Congress.
Democratic Congresswoman Maxine Waters of California called FIT21 a “wish list of big cryptocurrencies and does not deserve our support.”
The bill’s impact isn’t limited to cryptocurrencies, Waters said Wednesday.
FIT21 would move cryptocurrencies and some traditional securities from SEC oversight into a “regulatory no-man’s land, with no primary regulator,” he said. He called it “the worst, most damaging proposal I’ve seen in a long time” and predicted a recession if it passed.
So did Massachusetts Democrat Stephen Lynch, who called it a “radical rewrite of this country’s securities laws.”
As the traditional financial markets and cryptocurrency markets begin to merge, he predicted that the volatility of the cryptocurrency market will lead to catastrophe for the traditional financial market.
“This will cause chaos in our financial markets, sooner or later,” Lynch said.
Although Wednesday’s comments fell along party lines — with Republicans supporting the bill and Democrats urging their colleagues to vote “No” — several Democrats expressed their support.
Representative Wiley Nickel, Democrat of North Carolina, said the United States is “relying on a 90-year-old securities law that was written before the Internet was even invented.”
“We can’t wait for the next FTX to go into action,” he added.
SEC Chairman Gary Gensler, considered an industry foe, said the bill poses a risk to markets and investors.
FIT 21 would “undermine decades of precedent regarding the oversight of investment contracts, placing investors and capital markets at immeasurable risk,” Gensler said in a declaration on Wednesday.
The SEC has indicted major industry players, including ConsensSys, CoinBase, KrakenAND The Robinhood Market crypto firms, with securities violations.
Industry experts say SEC requirements are not applicable or designed for issuers of digital assets.
“For too long, the U.S. digital asset ecosystem has been plagued by regulatory uncertainty that has stifled innovation and left consumers unprotected,” McHenry said in a press conference. declaration earlier this month.
Industry support
“The absence of clear rules creates confusion in the market for companies and leaves users and consumers without protection,” says the Blockchain Association he wrote in a letter to lawmakers in the Senate on Monday.
“This lack of clarity hinders innovation and hinders businesses, damaging America’s position in the global tech race.”
In a statement after the vote, Kristin Smith, CEO of the Blockchain Association, called the bill’s passage “a watershed moment and a sign of validation from Congress for the cryptocurrency industry in the United States.”
Last week, dozens of crypto firms, including Coinbase, Andreessen Horowitz and Kraken, signed an industry letter organized by the Crypto Council for Innovation in support of FIT21.
“The United States lags other major jurisdictions in developing a regulatory framework for digital assets,” the letter reads, adding that American innovators may migrate elsewhere.
“It is critical that the United States maintain its leadership in financial innovation.”
McHenry echoed the sentiment Wednesday.
“We are falling behind Europe,” he said. “This bill captures [us] so as not to lose ground in terms of innovation policy to the benefit of the Europeans, the UK, Singapore, Japan and Hong Kong.”
Update, May 22: This story has been updated to include the partisan divide in Congress’ vote for FIT21 and a statement from Blockchain Association CEO Kristin Smith.
Inbar Preiss is DL News’ regulatory correspondent. Contact the author at inbar@dlnews.com. Aleks Gilbert is DL News‘ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.