The first major cryptocurrency regulation bill to be passed by the U.S. House was approved this week with bipartisan support. But there’s still a ways 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 leading regulator of digital assets in the U.S. It would establish consumer protections for the U.S. crypto markets, mandating comprehensive disclosure requirements for digital asset issuers.
It would also more clearly define what makes a crypto token a security or a 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 the CFTC are currently in a food fight for control over this asset class,” said Rep. Patrick McHenry (R-N.C.), one of the leading supporters of the bill. “They have created an impossible situation where the same firms are subject to competing and contradictory enforcement actions by the two different agencies. FIT21 fixes this by creating a regulatory framework that will provide clear rules of the road and strong guardrails for the Americans engaging with the digital asset ecosystem.”
FIT21’s structure points to a new and productive way forward for the U.S. crypto industry.
“The most important aspect of FIT21 is creating a coherent framework for how existing regulatory agencies divide the digital asset and crypto world,” said James Wester, Director of Cryptocurrency at Javelin Strategy & Research. “Under the bill, the framework is based on how tokens are being used rather than on hard-to-define regulatory interpretations or opinions.
“Additionally, creating a real registration regime, where participants know the rules for registering and have a path to compliance, will help ensure the good actors are separated from the bad actors,” he said.
What Lies Ahead
FIT21 passed with 208 out of 211 Republicans supporting the bill, while 71 Democrats voted yes and 133 voted against. Several prominent Democrats came out in support, including former Speaker of the House 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 he would veto it.
“This is another sign that our current crypto regulation is inadequate for where the technology is going, and that fixing those inadequacies is seeing bipartisan support,” Wester said. “That’s good news if the U.S. is going to remain a leader as digital assets, crypto, and blockchain evolve. That’s important in its own right, but it’s also crucial if we want to see regulations that provide real protections and safeguards.”