U.S. House Passes FIT21 Crypto Bill 279-136, Bipartisan Support Noted

Key Takeaway

• The U.S. House of Representatives passed the FIT21 bill with a 279-136 vote, marking a significant policy win for the crypto industry.
• The bill aims to regulate digital assets, designating the CFTC as the primary regulator and defining crypto tokens as securities or commodities.
• Despite bipartisan support in the House, its future in the Senate remains uncertain due to lack of counterpart legislation and committee work.

Historic Crypto Legislation Vote

In a landmark decision, the U.S. House of Representatives approved the Financial Innovation and Technology for the 21st Century Act (FIT21) on Wednesday, marking the first major crypto bill to clear one of the chambers of Congress. The bill passed with a 279-136 vote, showcasing bipartisan support with 71 Democrats and 208 Republicans voting in favor. This significant milestone aims to reshape the regulatory landscape for digital assets in the U.S. by granting the Commodity Futures Trading Commission (CFTC) greater authority over digital assets deemed commodities and establishing new jurisdictional lines for the Securities and Exchange Commission (SEC).

Rep. Patrick McHenry (R-N.C.), chair of the Financial Services Committee, expressed optimism about the bill's passage, stating he hoped for "a substantial vote" to demonstrate momentum for digital asset legislation. The bill's future in the Senate remains uncertain, as there is no counterpart bill, and the White House has expressed opposition without threatening a veto.

Key Provisions and Support

FIT21 provides a framework for determining whether digital assets are securities, thereby clarifying the primary regulator for crypto companies. Rep. French Hill (R-Ark.) highlighted the bill's "5-step test on whether something is a decentralized blockchain or not" and its roadmap for regulatory oversight. The bill also includes provisions to mitigate conflicts of interest, impose capital requirements on intermediaries, and set higher standards for custody.

Rep. Jim Himes (D-Conn.) and Rep. Ro Khanna (D-Calif.) are among the Democrats supporting the bill. Himes called FIT21 "an important step forward in the regulation of the cryptocurrency industry," while Khanna emphasized the need for blockchain innovation in America. The bill has garnered support from various industry groups, including the Blockchain Association, Circle, ConsenSys, and Kraken, who argue that the absence of clear rules leads to market confusion and leaves consumers unprotected.

Opposition and Concerns

Despite its support, the bill faces significant opposition. Rep. Maxine Waters (D-Calif.), the ranking member of the House Financial Services Committee, criticized the bill as "the worst, most harmful deregulatory proposal" she has seen, likening it to the Commodity Futures Modernization Act, which she claims contributed to the 2008 financial crisis. Waters argued that FIT21 does not give the CFTC sufficient authority to target fraud and sunsets disclosure requirements after 180 days, creating a regulatory void.

A coalition of unions, consumer protection organizations, and academics, including the AFL-CIO and Americans for Financial Reform, sent a letter to House leaders urging them to vote against the bill. They argued that the bill's definition of "investment contract assets" could allow both crypto and traditional securities to evade rigorous oversight. SEC Chair Gary Gensler also opposed the bill, stating it would "create new regulatory gaps and undermine decades of precedent," potentially allowing fraudsters to avoid securities laws.

Street Views

• Josh Gottheimer, Representative (D-N.J.) (Cautiously Optimistic on the crypto regulation bill):

  "We need rules of the road... It's well-reasoned, thoughtful, bipartisan legislation. It's fit to become law if we work together."

• Maxine Waters, Representative (D-Calif.) (Bearish on the crypto regulation bill):

  "They have already made billions of dollars unlawfully issuing or facilitating the buying and selling of crypto securities. And Republicans are now proposing to reward these illegal activities by making these activities legal."