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The US House of Representatives voted on Wednesday in favor of crypto-friendly legislation known as FIT21, which would transfer oversight of cryptocurrency to a government agency viewed as more favorable to the industry.
The bill aims to establish a new legal framework for digital currencies, despite an unusual warning from the US securities regulator regarding potential financial risks.
In a bipartisan vote, the House approved the Republican-sponsored Financial Innovation and Technology for the 21st Century Act (FIT21). The final tally was 279-136, with 71 Democrats joining 208 Republicans in support of the legislation.
House approval is only the first step in the US legislative process. Although FIT21 passed the House, it still requires Senate approval and the President’s signature to become law. It remains uncertain whether the Senate will pass the bill.
FIT21 Crypto Bill Expands Industry Freedom, Shifts Power to CFTC
The legislation would grant expanded freedoms to crypto operators in the US and transfer greater regulatory oversight of digital assets to the Commodity Futures Trading Commission (CFTC).
Placing most digital assets under the CFTC’s jurisdiction would classify them as commodities rather than securities, shifting regulatory oversight away from the Securities and Exchange Commission (SEC). This move is significant, particularly given the crypto industry crackdown initiated by the Biden administration under the SEC’s purview.
The passage of the legislation potentially places President Joe Biden in a difficult position. He must decide whether to veto the bill, going against his own SEC chairman. This comes as former President Donald Trump courts the industry during his 2024 presidential campaign.
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After the vote, House Majority Whip Tom Emmer stated that the passage of the Act would pave the way for flourishing American digital asset innovation.
“This globally competitive framework will give entrepreneurs the clarity and assurance they need to build here, in the United States, while ensuring the next iteration of the web emulates our values,” he said.
FIT21 unlocks a conversation beyond innovation. It’s about national security, consumer protection & global competitiveness.
It’s about shaping what the future global digital economy looks like and how it functions.
Let’s give Americans the clarity needed to seize this moment. pic.twitter.com/scdatvjyp5
— Tom Emmer (@GOPMajorityWhip) May 22, 2024
SEC and White House Align in Opposition to FIT21’s Approach
Before the vote on Wednesday, the White House issued a statement saying the FIT21 bill does not do enough to safeguard consumers involved in certain cryptocurrency transactions. However, it stopped short of recommending a full veto.
Wednesday’s House vote followed SEC Chair Gary Gensler voicing criticism against FIT21. Gensler argued that the bill would, in some aspects, “create new regulatory gaps and undermine decades of precedent regarding the oversight of investment contracts,” potentially endangering investors and capital markets.
The federal regulator argued that FIT21 would work against already established securities law. It would negate the long-accepted Howey Test while reneging on current regulations regarding investment contracts, he said. This would allow crypto operators to “self-certify” their products.
“The crypto industry’s record of failures, frauds, and bankruptcies is not because we don’t have rules or because the rules are unclear. It’s because many players in the crypto industry don’t play by the rules,” Gensler continued.
