Bitcoin
US House Prepares to Vote on First Standalone Crypto Market Structure Bill
The US House of Representatives is poised to vote in favor of a crypto market framework bill for the first time, in a symbolic effort to radically reshape the country’s digital asset regulatory landscape.
The Financial Innovation and Technology for the 21st Century Act, sponsored by members of the House Financial Services and Agriculture Committees, will begin voting on Wednesday afternoon, where it is expected to pass with a bipartisan majority.
The bill, called FIT21, would grant the U.S. Commodity Futures Trading Commission (CFTC) greater spot market authority over digital assets considered commodities, while also creating new jurisdictional lines for the Securities and Exchange Commission (SEC). ). Crypto companies and digital asset issuers would have a framework for determining whether and how their assets are securities as defined by the bill, which in turn would allow them to know who their primary regulator could be.
Rep. Patrick McHenry (RN.C.), who chairs the Financial Services Committee, told reporters on Tuesday that he expected “a substantial vote” in favor of the legislation to demonstrate that there is real momentum for digital asset legislation , a week after the Senate voted in favor of a House resolution that overturned SEC accounting guidance.
The bill is expected to pass, with a handful of Democrats joining a majority of Republicans in voting for the bill. The bill’s path through the Senate is less clear, and the White House said Wednesday it opposed the legislation, although President Joe Biden did not threaten to veto.
The bill has been the subject of much discussion in recent days.
Rep. Jim Himes (D-Conn.), one of the at least nine Democratic lawmakers who said they would support the bill said it “seems[ed] I look forward to working with my colleagues on the Financial Services Committee in our continued oversight of this issue.”
“FIT21 is an important step in regulating the cryptocurrency industry and a significant improvement on the status quo,” he said in a statement.
Rep. Ro Khanna (D-California) announced he would vote in favor of the project shortly before the vote on Wednesday, saying “we need blockchain innovation here in America.”
Rep. French Hill (R-Ark.) told reporters Tuesday that the bill creates a “5-step test for whether something is a decentralized blockchain or not” and includes a roadmap for the regulator to use.
In comments to the House Rules Committee, he said lawmakers who developed the bill engaged with regulators — including the SEC — for more than a year, incorporating their feedback into the legislation.
“We include provisions to mitigate conflicts of interest. We impose capital and other necessary requirements on intermediaries. And we impose higher standards of custody,” he said.
There is also an interim process where companies need to file a “notice of intent to register” with agencies, he said.
Opposition to the project, however, begins within the House Financial Services Committee itself.
Rep. Maxine Waters (D-Calif.), the committee’s ranking member, dubbed the bill a “law unfit for purpose” and told the House Rules Committee on Tuesday that “it is perhaps the worst and most harmful deregulation proposal that I’ve already done. we’ve seen for a long time”, comparing it to Commodity Futures Modernization Act. The CFMA, Waters charged, deregulated certain derivative products that later “exploded our economy when AIG collapsed.”
FIT21 does not give the CFTC greater authority to combat fraud or other crimes, despite directing the agency to oversee digital commodities, she said. The bill also eliminates disclosure requirements after 180 days, meaning the regulator cannot force companies it is supposed to regulate to provide audited financial statements after that deadline.
“What’s even more problematic is the bill’s definition of ‘investment contract assets,’” she said. “Securities that meet this definition would be transferred into a regulatory void, with no primary regulator and virtually no laws and regulations to speak of. Importantly, the investment contract asset definition is not limited to cryptography and it would be quite easy for both cryptographic and traditional securities to be formatted to meet this definition.”
A group of trade unions, consumer protection organizations, academics and others sent a public letter to House Speaker Michael Johnson (R-La.) and Minority Leader Hakeem Jeffries (DN.Y.), asking them to vote against the bill and offering a list of concerns similar to Gensler’s.
The letter took aim at the industry more broadly, saying that crypto “still struggles to demonstrate viable use cases outside of speculative investing” and referencing the several ongoing bankruptcies and civil and criminal litigation.
“The industry has recovered superficially this year, in part due to the controversial approval of spot BTC ETPs by the Securities and Exchange Commission,” the letter said. “However, the scams, hacks, theft, instability, reckless promotional activities and regulatory evasion that were present during the last crypto market remain endemic in the industry today.”
The letter was signed by organizations including the AFL-CIO, Americans for Financial Reform, Revolving Door Project, National Consumer Law Center and more than 30 others, as well as 10 individuals.
Echoing Gensler, the groups said they were concerned that the bill would weaken existing securities laws to the point where even non-crypto companies could “avoid stricter oversight” by linking to a decentralized network (or at least claiming which were linked to a decentralized network). network). While the bill gives the CFTC greater authority, the letter says that authority “is vague,” to the point that it could undermine other agencies like the Consumer Financial Protection Bureau.
“Overall, we believe that this bill, as drafted, introduces a political ‘cure’ that would be far worse than the disease and would create significant harm within and far beyond the crypto industry,” the letter read.
The bill’s supporters argue that legislation is needed to support companies’ efforts to “build a better financial services system and a better Internet.”
“Since the inception of the Bitcoin network in 2009, the blockchain and digital asset industry has existed without targeted market regulation,” a letter presented by the Blockchain Association, a lobby group, said. “The absence of clear rules creates confusion in the market for companies – and leaves users and consumers unprotected.”
The letter, signed by groups including stablecoin issuer Circle, Ethereum incubator ConsenSys, venture capital firm Digital Currency Group, exchanges such as Kraken and 50 other companies in the sector, further argued that a “lack of clarity” was running the risk of putting the US behind. in the “global technology race”.
SEC Chairman Gary Gensler published an affirmation on Wednesday opposing the legislation. In it, he raised the specter of crypto’s various meltdowns and scams, suggesting that the bill could allow even traditional pump and dumpers or penny stock dealers to escape oversight by branding themselves as users of decentralized networks.
“We should make the political choice to protect the investing public rather than facilitate the business models of non-compliant companies,” he said.