By Michael Scott
The US House of Representatives held a vote with lawmakers supporting the crypto market structure bill seeking to bring clarity to digital assets regulation.
The lower chamber lawmakers voted on Wednesday, May 22, for the Financial Innovation and Technology for 21st Century Act (FIT21). The bill is set to have a sweeping impact on US regulatory laws for crypto assets if it becomes law.
The House of Representatives saw a superior majority support the bill in 279-136 favor. 208 Republican legislators supported the bill, and 71 Democrats joined. Only three Republican House members opposed the bill, and a third of Democrats brokebroke party lines to support FIT21.
The bipartisan push witnessed in passing the FIT21 reveals shifting attitudes towards cryptocurrencies on Capitol Hill.
A week ago, the House (228-182) and Senate (60-38) passed Resolution 109 to roll back Staff Accounting Bulletin 121 (SAB121) issued by the US Securities and Exchange Commission (SEC). The measure received support from notable Democratic lawmakers, including Senate Majority Leader Chuck Schumer.
FIT21 to Deliver Clarity in US Crypto Regulation
The FIT21 bill passed the House vote will facilitate the creation of a federal framework to regulate crypto assets by ending the jurisdiction contest between the Commodity Futures Trading Commission (CFTC) and SEC.
The FIT21 allows issuers to self-certify crypto assets as digital commodities. The SEC chair, Gary Gensler, blasted the bill.
President Joe Biden echoed Gensler’s criticism by vocalizing discontent with the bill, calling out insufficient protections for the investors. In a Wednesday letter, he would urge a comprehensive yet balanced approach to the regulatory framework for the crypto assets, suggesting its absence in the status quo.
FIT21 restricts the SEC’s regulatory reach instead, according to the CFTC’s exclusive oversight over the crypto asset commodities.
The bill outlines defined criteria for the digital asset classification relative to the decentralization level in the project. It considers the token’s supply owned by a party and the vulnerability of the blockchain to influence from one party.
Hours before the House vote, the chamber members debated the merits of FIT21. The House Financial Services Committee (HSFC) chair, Patrick McHenry (R-SC), hailed fellow cosponsors, indicating that it will end the SEC v CFTC contest for control over the digital asset class.
McHenry lamented that the two regulatory agencies created the impossible condition where crypto firms were subjected to competing yet contradictory enforcement actions. The situation left consumers and innovators vulnerable, a problem FIT21 will fix.
Democrats Express Discontent on FIT21 Bill
Several Democrats, led by Representative Maxine Waters, criticized the bill, indicating that it offers significant exemptions from the securities laws. She decried that crypto firms are adamant about registering, and the bill exonerates them from the obligation.
Representative Brad Sherman (D-CA) echoed fellow Democrats to oppose the bill, terming the changes as a dagger that will hurt the hundred trillion dollar markets powering the US economy. Additionally, he lamented that crypto users were fond of tax evasion and circumventing the sanctions.
Sean Casten extended the Democrat’s discontent towards the bill, indicating that it will ease the channels for terrorist groups and criminal actors using crypto. The Illinois representative warned terrible guys like those perpetrating the child sexual abuse material (CSAM) trade love crypto.
Pursuing clarity of authority between the SEC and CFTC has been the industry’s objective, as advocates have lamented the absence of clarity.
Bipartisan Support in Senate Key for FIT21 Passage
The FIT21 covers a comprehensive scope to address trading platforms, decentralized finance (DeFi), and a defined process for project developers to raise funds.
The FIT21 passage is timely, given the years of squabbling over bills, including proposals to regulate stablecoins. The process took an active course in 2023 when the House Republicans set up a digital assets subcommittee to deliver clearer crypto rules.
Representative Warren Davidson (R-OH) hailed the vote, indicating the FIT21 was long overdue. He reflected on the six-year journey when he tabled the Token Taxonomy proposals in 2018, lamenting the delay pushed digital assets innovation and investment offshore.
The FIT21 bill faces a mountainous hurdle in the Democrat-controlled Senate. Nonetheless, Senator Cynthia Lummis (R-WY) expressed confidence via a post on X (formerly Twitter), asserting that a bipartisan majority will support the FIT21.