The House of Representatives is set to discuss a bill that would divide responsibility for cryptocurrency regulation between the SEC and CFTC based on the level of centralized control of associated blockchains. The Financial Innovation and Technology for the 21st Century Act (FIT21) would grant the SEC authority over tightly controlled cryptos, while more decentralized tokens like bitcoin and ether would be overseen by the CFTC. This bill aims to end the turf war between the agencies and provide a framework for resolving regulatory disputes over cryptocurrencies.
The legislation, advanced by the House Financial Services Committee, also seeks to enhance transparency and accountability of crypto exchanges, brokers, and dealers while offering a compliant method for blockchain developers to raise funds. The classification of a cryptocurrency as a commodity or security would depend on the functionality and level of decentralization of its associated blockchain. The bill defines a decentralized blockchain as one where no individual has unilateral control and no entity controls 20% or more of the digital asset or its voting power.
Rep. French Hill, chair of the subcommittee on digital assets, believes FIT21 could be a significant piece of digital asset legislation that would encourage continued investment and innovation in financial services. The bill has received support from former President Trump and numerous digital asset organizations and companies, including Coinbase, Kraken, and Andreessen Horowitz. Despite potential support in the House, the bill’s fate in the Senate remains uncertain, with Democrats’ backing in the House vote possibly influencing the Senate’s decision.
The House vote on FIT21 comes shortly after the Senate overturned an SEC crypto accounting policy, SAB 121, which required companies to record customers’ cryptocurrencies on their balance sheets. This policy reversal could have major capital implications for banks and financial institutions dealing with crypto clients. President Biden has expressed intent to veto the effort, pointing to potential challenges and disagreements in the cryptocurrency regulatory space. The outcome of the House vote and subsequent Senate deliberations will shape the future regulatory landscape for digital assets in the US.
FIT21 represents an important stride towards establishing a federal regulatory framework for digital assets in the United States. The bill’s support from key industry players, lawmakers, and former President Trump underscores the significance of creating clear guidelines for managing and overseeing cryptocurrencies. With the evolving nature of the crypto market and the increasing interest in digital assets, a cohesive regulatory approach is essential to promote innovation, protect investors, and maintain America’s leadership in the global financial landscape. The outcome of the House vote and subsequent Senate deliberations will be closely watched by industry stakeholders and policymakers alike to determine the trajectory of cryptocurrency regulation in the country.
