The U.S. House has turned a deaf ear to the unusual warnings of the country’s securities regulators as it has passed a bill that aims to create a new legal framework for digital currencies.
However, the Securities and Exchange Commission (SEC) which is the US securities regulator, issued a stern warning, stating that the bill could potentially create new financial risks while the bill’s supporters in the U.S. Congress argue that the bill will provide regulatory clarity and help promote the industry’s growth.
The Financial Innovation and Technology for the 21st Century Act (FIT21), sponsored by the Republicans, received approval from the House in a bipartisan vote. The legislation garnered a final tally of 279-136, with 71 Democrats aligning with the 208 Republicans in support of the bill.
House approval is just the first hurdle for new laws in the US. The FIT21 Act, despite passing the House, still needs Senate approval and the President’s signature to become law. It is currently uncertain if the Senate will pass the bill too.
The FIT21 Crypto Bill Enhances Industry Freedom And Transfers Authority To The CFTC
The legislation would grant expanded liberties to crypto operators in the US. It would also transfer greater regulatory oversight of digital assets to the Commodity Futures Trading Commission (CFTC).
Transferring the majority of digital assets to the supervision of the CFTC would classify them as commodities rather than securities, leading to a transfer of regulatory control from the SEC.
This change holds great importance, particularly in light of the Biden administration’s crackdown on the crypto industry, which was previously overseen by the SEC.
The approval of the legislation could potentially create a dilemma for President Joe Biden. He will have to determine whether to oppose his own SEC chairman and decline to veto. This situation arises as former President Donald Trump seeks favor from the industry for his upcoming 2024 presidential bid.
After the vote, House Majority Whip Tom Emmer said 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.
The SEC And The White House Are In Agreement Against FIT21’s Strategy
Before the vote, a statement was released by the White House expressing concerns that the FIT21 bill does not adequately protect consumers engaged in specific cryptocurrency transactions. Nevertheless, the administration stopped short of vetoing the legislation entirely.
The House vote also 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 asserted that FIT21 would go against the already established securities law. It would nullify the long-accepted Howey Test while going back on current regulations on investment contracts, he mentioned. This could potentially lead to crypto operators being able 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.
What To Know
The bill’s passage highlights the ongoing tension between crypto proponents and regulators grappling with the novel challenges posed by digital assets. Whether the Senate will take up the bill and whether the SEC will mount a legal challenge remain to be seen.
Shardeum Cofounder Nischal Shetty commented, “The FIT21 Act is a huge win for the Web3 ecosystem. By offering regulatory clarity and fostering innovation, this legislation has the potential to drive wider crypto adoption and expand the Web3 landscape. The US is taking a crucial step towards integrating crypto assets with traditional markets, a move that India should closely consider.”
“To capitalize on this momentum, it’s vital to focus on growing the Web3 ecosystem in India. This includes educating the youth about Web3, increasing the number of developers working on Web3 products, and creating more career opportunities in this space. Developing consumer dApps tailored for the Indian market will be essential. With the clarity and support provided by initiatives like FIT21, we can expect a significant boost in adoption, which will naturally lead to better tax laws and regulatory frameworks,” he added.
