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The US House of Representatives has passed the FIT21 Act, which might change crypto regulation. It now faces a pivotal test in the Senate.
The US House of Representatives voted on May 22 to pass a landmark cryptocurrency bill, just a few months before the presidential election.
The bill received strong bipartisan support, passing with 279 votes in favor and 136 against, including 71 Democrats (such as Nancy Pelosi) and 208 Republicans.
FIT21 Act Garners Votes From 71 Democrats
The FIT21 Act aims to establish clear regulatory guidelines for digital assets, a long-sought objective by the crypto industry.
#PASSED: In a watershed moment for the U.S. digital asset ecosystem, the House passes the Financial Innovation and Technology for the 21st Century Act with overwhelming bipartisan support.
🚂 Next stop for #FIT21, the Senate.
👇 Read more 🔗https://t.co/KhCNE1vD0l pic.twitter.com/Equez1geX5
— Financial Services GOP (@FinancialCmte) May 22, 2024
Republican Rep. Patrick McHenry of North Carolina, a co-sponsor of the bill and chairman of the House Financial Services Committee, believes the bill would stop the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) from fighting over who regulates the cryptocurrency sector.
The FIT21 Act proposes a framework that would exempt cryptocurrencies from many securities regulations if they achieve sufficient decentralization. This goes against the SEC’s current approach to crypto regulation and would likely remove much of the crypto industry from their control.
Biden Administration comments on FIT21
President Joe Biden and US SEC Chair Gary Gensler had earlier issued statements to express their concerns about the FIT21 Act.
In a May 22 announcement, the Biden administration opposed the passage of H.R. 4763, the FIT21 Act. The administration argued that the bill “lacks sufficient protections for consumers and investors who engage in certain digital asset transactions.”
This statement from the White House came soon after Chair Gensler released the agency’s critique of the bill, warning that FIT21 would “create new regulatory gaps” and potentially jeopardize the stability of U.S. capital markets.
FIT21 Act Marches to Senate Despite SEC Pushback
Gensler supported his position by referencing a January report from Chainalysis, highlighting “widespread noncompliance” among crypto firms, leading to “widespread fraud, bankruptcies, failures, and misconduct.”
Meanwhile, the crypto industry, including firms like Coinbase, has contributed strategic efforts and supported pro-crypto political-action committees, becoming one of the most well-financed forces in the 2024 campaign.
Thanks to you, FIT21 has passed with strong bipartisan support in the House.
This Act will protect consumers and foster innovation & job creation by providing clear rules for crypto.
And while this is just step 1 in turning the Act into law, let’s celebrate this historic win. pic.twitter.com/Wh0GtdlN7y
— Coinbase 🛡️ (@coinbase) May 22, 2024
The industry contends that the FIT21 Act would help crypto businesses thrive in the US by providing a clear set of rules to follow rather than the complex securities regulations they currently face.
The FIT21 Act has cleared the first hurdle by passing through the House, but the journey is far from over. The next step is to survive the Senate, where its future is uncertain.
As the November election approaches, priorities may shift, and the bill faces challenges, including opposition from one of the country’s staunchest crypto critics, Senator Elizabeth Warren.
Recall that the US Senate passed a resolution to overturn a rule that restricted banks and crypto firms from doing business, indicating a complex and evolving stance on crypto regulation on May 16, 2024.
1/ Today, the Senate voted, in overwhelmingly bipartisan fashion, to #repealSAB121, an anti-innovation accounting bulletin which was improperly issued by the SEC in 2022.
— Blockchain Association (@BlockchainAssn) May 16, 2024
If approved and passed into law, the FIT21 Act will primarily give the CFTC more regulatory control over cryptocurrencies, which the crypto industry views as a more lenient regulator than the SEC.
While the SEC would still retain oversight of cryptocurrencies that do not meet the criteria for sufficient decentralization, FIT21 introduces a mechanism allowing cryptocurrencies initially classified as securities to be reclassified and sold as commodities if they achieve the required level of decentralization.
This change is seen as a move toward a more favorable regulatory environment for the crypto industry, offering clearer pathways for compliance and operation within the US financial system.
