The House voted to pass bipartisan legislation to create a regulatory framework for cryptocurrencies.
The House voted 279-136 to approve the long-awaited legislation, which now heads to the Senate, where it faces uncertain prospects. The Financial Innovation and Technology for the 21st Century Act, which is known as FIT21, is meant to bring about regulatory clarity for digital assets and safeguard consumers and investors.
House Financial Services Committee Chairman Patrick McHenry (R-NC) was a co-sponsor of the bill and said FIT21 is the “culmination of years of bipartisan efforts to finally provide clarity.” He said it would undercut some of the regulatory uncertainty that has harmed the cryptocurrency world.
“This legislation will cement American leadership of the global financial system for decades to come and bolster our role as an international hub for innovation,” McHenry said. “I look forward to taking a monumental step to finally deliver the transparency, accountability, and consumer protections that the digital asset ecosystem desperately needs.”
The bill provides the Commodity Futures Trading Commission with new regulatory jurisdiction over digital commodities and further clarifies the Securities and Exchange Commission’s authority over cryptocurrencies that are offered as part of an investment contract.
The legislation would give the CFTC regulatory authority over digital assets that have functional blockchains but are decentralized, meaning that no single individual or entity has “unilateral authority” to control the operation of or access to the blockchain. For instance, bitcoin, the most prevalent cryptocurrency, would fall under that umbrella.
On the other hand, the SEC would be given regulatory authority over digital assets if its “associated blockchain is functional but not decentralized,” according to the Congressional Research Service. So, for instance, digital assets owned by crypto exchanges that hold a large stake themselves would fall under SEC oversight.
The legislation would also establish a process to allow secondary market trading of digital commodities if they were first offered as part of an investment contract. It additionally imposes “comprehensive customer disclosure, asset safeguarding, and operational requirements” on entities that must be registered with the CFTC or SEC.
Developers of digital assets and crypto must be required to provide accurate and relevant disclosures about ownership and structure. Additionally, entities like exchanges and brokers would be required to provide important disclosures to customers.
“Our collaborative effort establishes the essential clarity and security needed to foster innovation and ensure our nation’s prominence in the global technological revolution,” House Agriculture Committee Chairman Glenn Thompson (R-PA) said.
The bill had support from outside crypto groups and proponents of maintaining and growing the digital assets space.
Last week, the Crypto Council for Innovation led a letter to House Speaker Mike Johnson (R-LA) and House Minority Leader Hakeem Jeffries (D-NY) urging members of the House to rally behind the legislation. Nearly 60 groups, including developers, startups, and the biggest crypto firms, signed on to the correspondence.
“By passing this legislation, we can accelerate the growth of blockchain technology and digital assets, fostering financial inclusion and protecting national security,” the letter reads. “It is crucial for the U.S. to maintain its leadership in financial innovation.”
It isn’t clear how the bill will fare in the Senate or whether President Joe Biden intends to sign it into law. The White House issued a statement Wednesday saying the bill lacks “sufficient protections for consumers and investors” but stopped short of a veto threat.
If it becomes law, it will mark the most comprehensive regulatory framework for the crypto industry from Congress to date.
Speaking with reporters on Tuesday before the vote, McHenry said the bill has likely gained more momentum and courted more support over the past several months since it was introduced. For one, he said more of his colleagues understand digital assets and their importance than in July of last year.
“We have more real-world use cases for digital assets today than we did in July of last year,” McHenry added.
McHenry said many places in the world that the United States is competing with have a more competitive regulatory regime and companies in the U.S. say they would “rather go to Europe and innovate” than do so domestically.
“Which is the dumbest, craziest thing I’ve heard. We’ve never been behind Europe in innovation, at least not in the last 150 years,” the North Carolina congressman said.
Regarding movement in the Senate, Thompson said Thursday that the House has laid out a very comprehensive piece of legislation to start with, one Republicans will be able to get through in the House on a bipartisan basis.
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Still, there is a chance that the Senate doesn’t end up getting this legislation passed in time for the election. In that case, Rep. French Hill (R-AR), who leads the digital assets subcommittee, said he has no doubt that this digital asset framework would be “top of mind” for committee action early in the next session of Congress.
“We’ve built consensus, direction, on a bipartisan basis from day one,” Hill told reporters.
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