The US House of Representatives passes a sweeping crypto FIT21 bill

  • The crypto regulation bill passed the U.S. House of Representatives on a bipartisan basis.
  • The FIT21 bill promises to give commodity regulators more oversight of digital assets.
  • The bill may not pass the next stage in the Senate.
  • President Joe Biden does not support the bill but said he would not veto it.

The US House of Representatives voted to pass a landmark crypto bill as digital assets become a political football just months before the presidential election.

The Republican-led Financial Innovation and Technology for the 21st Century Act, known as the FIT21 Act, passed on a bipartisan vote of 279 votes in favor to 136 votes against.

Notably, 71 Democrats supported the bill, including former Speaker of the House of Representatives Nancy Pelosi. Another 133 voted against.

Only three Republicans voted in opposition. Another 208 supported the bill.

FIT21 promises to set clear rules for digital assets that the crypto industry has long sought.

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 battle for control” over crypto being waged between the Securities and Exchange Commission and the Commodity Futures Trading Commission, said Republican Rep. Patrick McHenry of North Carolina, co-sponsor of the bill and chairman of the House Financial. Services committee.

“This is the biggest moment in crypto policy and legislation yet in the history of the United States,” 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 find its way through the Senate. The approaching elections mean that priorities may shift.

“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 aide.

The progress is symbolically important, Colbert said, and shows the political will to regulate the digital asset market. It also creates a reference point for a bipartisan agreement on how to regulate crypto.

And even if the bill doesn’t pass in its current form, its provisions could find their way into other laws.

What’s on the bill?

The bill is tailor-made for digital assets and provides an unprecedented framework for the sector. It passed the House Financial Services and Agriculture committees in July with bipartisan support.

FIT21 establishes definitions for crypto assets and divides responsibility between the Commodity Futures Trading Commission and the Securities and Exchange Commission.

The rules would give the CFTC, which is seen as friendlier to the industry, more jurisdiction over the sector. Definitions determine whether an asset is subject to SEC or CFTC supervision.

Decentralized finance falls outside the scope of the bill.

The rules would provide an “increased level of comfort knowing that we have explicit authority to continue doing what we’re doing, which is really all we want at this point,” Colbert said.

The vote follows another political victory for crypto. Last week, the US House and Senate voted to repeal the SEC’s controversial accounting guidance, called SAB121.

At the same time, the industry is anticipating regulatory approval of Ethereum exchange-traded funds.

Even more backlash

The White House wrote in a brief letter Wednesday that the bill “in its current form does not provide adequate protections for consumers and investors engaged in certain digital asset transactions.”

But the White House specifically said it will work with Congress to develop a regulatory framework for digital assets.

California Democrat Maxine Waters has called FIT21 a “wish list for major crypto” and does not deserve our support.

The bill’s impact is not limited to crypto, Waters said on Wednesday.

FIT21 would move both cryptocurrencies and some traditional securities out of SEC oversight and into a “regulatory no man’s land, with no primary regulator,” she said. She called it the “worst and most damaging proposal I have seen in a long time” and predicted a recession if it were to pass.

So did Massachusetts Democrat Stephen Lynch, who called it a “radical rewrite of this country’s securities laws.”

As crypto and traditional financial markets begin to merge, he predicted that volatility in the crypto market would lead to a catastrophe in the traditional financial market.

“This will ultimately cause chaos in our financial markets,” Lynch said.

While Wednesday’s comments also fell along party lines — with Republicans supporting the bill and Democrats urging their colleagues to vote “No” — several Democrats voiced their support.

Rep. Wiley Nickel, a North Carolina Democrat, said the U.S. was “relying on a 90-year-old securities law written before the Internet was even invented.”

“We can’t wait for the next FTX to take action,” he added.

SEC Chairman Gary Gensler, who is considered an enemy of the industry, 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 statement Wednesday.

The SEC has charged major industry players, including ConsenSys, Coinbase, Kraken and Robinhood Market’s crypto firms, with securities law violations.

Industry experts say the SEC requirements do not apply to or are designed for digital asset issuers.

“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 statement earlier this month.

Industry support

“The lack of clear rules creates confusion in the marketplace for businesses – and leaves users and consumers unprotected,” the Blockchain Association wrote in a letter to Senate lawmakers on Monday.

“This lack of clarity stifles innovation and holds back businesses, harming America’s position in the global technology race.”

In a statement after the vote, Kristin Smith, CEO of the Blockchain Association, called the passage of the bill “a turning point and a sign of validation by Congress for the crypto industry in the United States.”

Last week, dozens of crypto companies – including Coinbase, Andreessen Horowitz and Kraken – signed an industry letter organized by the Crypto Council for Innovation in support of FIT21.

“The US lags behind other major jurisdictions in developing a regulatory framework for digital assets,” the letter said, adding that US innovators could migrate elsewhere.

“It is critical for the US to maintain its leadership in financial innovation.”

McHenry echoed the sentiment Wednesday.

“We are falling behind Europe,” he said. “This bill is working [us] so that we don’t lose innovation policy to the Europeans, to the people of Britain, to Singapore, to Japan, to Hong Kong.”

Update, May 22: This story has been updated with the partisan breakdown of Congress’ vote for FIT21 and a statement from Kristin Smith, CEO of the Blockchain Association.

Inbar Preiss does DL News’ correspondent regulations. Contact the author at inbar@dlnews.com. Aleks Gilbert does DL news‘DeFi correspondent from New York. You can reach him at aleks@dlnews.com.

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