In addition to the SEC’s decision on spot Ethereum ETFs, this week’s spotlight will be on the House’s floor vote on H.R. 4763, the Financial Innovation and Technology for the 21st Century Act (FIT21), a bill expected to be the closest effort of US regulators to establish a legal framework for digital assets.
However, an email shared with Politico shows that House Democrat leaders “strongly opposed” the bill.
The email was reportedly sent by House Financial Services Committee Ranking Member Maxine Waters (D-Calif.) and House Agriculture Committee Ranking Member David Scott (D-Ga.). Despite their opposition, the two Democratic leaders chose not to whip the vote.
The Dems Hate Crypto
Explaining the reasons behind the opposition, Waters and Scott noted in the email that the bill would undermine “decades of legal precedent and case law,” create “uncertainty” in the “traditional securities market,” and weaken “investor protections.”
A key concern is the bill’s creation of a “safe harbor” for some digital assets, potentially leaving them unregulated until the SEC and CFTC finalize new rules. Democrats argue this opens the door to fraud and manipulation.
Furthermore, in a “Dear Colleague” letter published on the House Financial Services Committee’s Democrats page, they also claimed the bill was “not fit for purpose.”
The two lawmakers also believe that enacting the bill would prevent shareholders from suing public companies, preempt state regulations surrounding digital assets, undermine fiduciary requirements, and negatively affect capital markets.
A Decent Bill
The FIT21 legislation aims to introduce numerous changes to the US regulatory approach to digital assets. One of the bill’s highlights is putting the digital asset sector under the regulation of the Commodity Futures Trading Commission (CFTC).
Currently, both the Securities and Exchange Commission (SEC) and the CFTC can make an impact on the industry, but the two agencies struggle to reach consensus. An example of the flash is the classification of Ethereum (ETH). While the CFTC is inclined toward commodity status, the SEC allegedly attempted to classify ETH as a security.
FIT21 is considered the US’s greatest effort to provide clear guidance for the new industry, especially since the country appears to lag behind other jurisdictions regarding digital asset regulation.
Backed by numerous crypto entities, including Coinbase, Kraken, Andreessen Horowitz, the bill seeks to establish measures to protect customers against risks associated with digital assets and a framework to hold these assets as well as their handling in bankruptcy proceedings.
Better Locations Exist For Crypto Business
Industry experts think the FIT21 legislation, if it becomes law, will play an important role in the future of the cryptocurrency sector in the US. The current absence of clear guidance has created much confusion for businesses operating in the country, even pushing many to shift to other jurisdictions where the legislative landscape is more welcoming.
The email from the Democratic Whip’s office also calls members to vote against H.R. 192, a separate bill that restricts the Federal Reserve’s ability to issue a central bank digital currency (CBDC). Democrats argue that the bill could “undermine the Fed’s ability to conduct monetary policy.”
The “battle” between the two parties that lead the US has become more intense. Recently, the House passed H.J.Res. 109, a bill that aims to overturn the SEC’s Staff Accounting Bulletin No. 121 (SAB 121). Last Thursday, the U.S. Senate voted in favor of the bill, bringing it to the President’s desk.
President Joe Biden is expected to make a decision on whether to sign the bill or veto it. According to a statement issued by the White House before the House’s vote, the Biden administration may choose to veto the bill as they think it could undermine the SEC’s ability to regulate digital assets.
However, with the coming presidential election, Biden may want to consider this option as it could lead to loss of votes, given the fact that his biggest rival Donald Trump has publicly supported the crypto industry.
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