(Kitco News) – The U.S. House of Representatives passed H.R. 4763, also known as the Financial Innovation and Technology for the 21st Century Act (FIT21), in a late vote on Wednesday, setting the stage for the bill to advance to the Senate.
The goal of FIT21 is to help provide regulatory clarity for digital assets by defining the roles the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) have over digital assets. It would also help clarify the process for classifying if a cryptocurrency is a commodity or security and give most regulatory control of the sector to the CFTC.
“The legislation provides the CFTC with new jurisdiction over digital commodities and clarifies the SEC’s jurisdiction over digital assets offered as part of an investment contract,” a press release from the House Financial Services Committee said. “Additionally, the bill establishes a process to permit the secondary market trading of digital commodities if they were initially offered as part of an investment contract. Finally, H.R. 4763 imposes comprehensive customer disclosure, asset safeguarding, and operational requirements on all entities required to be registered with the CFTC and/or the SEC.”
In a development that has become more common in recent weeks, the Act received some bipartisan support, with 71 Democrats joining 208 Republicans to vote in favor of the bill.
“Today, the House took a historic step by passing FIT21 with broad, bipartisan support,” said House Financial Services Committee Chairman Patrick McHenry (R-NC). “FIT21 provides the regulatory clarity and robust consumer protections necessary for the digital asset ecosystem to thrive in the United States. The bill also ensures America leads the financial system of the future and remains a hub for technological innovation.”
President Biden released a statement before the vote urging lawmakers to reject the legislation, warning that it would “affect the regulatory structure for digital assets in the United States,” and that it “lacks protections for consumers and investors who engage in certain digital asset transactions” in its current form.
But his plea to reject was rebuffed by Republicans and dozens of Democrats, including several high-profile names, such as former House Speaker Nancy Pelosi (D-CA).
The bill will now move on to the Senate, where its fate is uncertain as it has no companion bill and faces one of the country’s biggest crypto critics, Senator Elizabeth Warren (D-MA).
The recent Senate approval of H.J.Res. 109, a resolution nullifying the SEC’s Staff Accounting Bulletin No. 121, has provided cause for hope for many that FIT21 will be approved by the Senate. However, it could still be months before the body considers FIT21, as there is no time constraint on when senators must act on it.
Once arriving in the Senate, the bill will likely be assigned to a committee for possible rounds of reviews, hearings, and markups. After that is complete, it must receive majority support from at least 51 senators for it to pass.
Parts of the bill could likely change as members of the House and Senate iron out any differences in their versions of the bill. Once they settle on the final language, it will need to go back through Congress for final approval. If approved, President Biden will have ten days to sign or veto FIT21.
“House passage of FIT21 is necessary to bring stability and clarity to the digital assets ecosystem,” said Rep. Dusty Johnson (R-SD). “Without this bill, digital asset innovation will continue to be filled with uncertainty. Today’s victory gets us one step closer to establishing clear rules of the road for developers in the industry so America can remain a global hub for tech and finance innovation. I hope the Senate considers this bill soon so we can finalize this essential framework.”
For those in the digital asset arena who have been imploring the U.S. government to provide greater clarity around cryptocurrencies, the approval was a welcomed sight.
“The bipartisan passage of H.R. 4763, the Financial Innovation and Technology for the 21st Century Act (“FIT21 Act”), is a welcome step to build our next generation of financial infrastructure,” said Nicole Valentine, FinTech Director at Milken Institute, in a note to Kitco Crypto. “Regulatory certainty and clarity for financial innovation are critical to the United States financial system’s growth, competitiveness, and resilience.”
“The FIT21 Act supports the responsible innovation of digital assets and provides the clarity and guidelines necessary to innovate, build, and invest with a degree of certainty,” she added. “We see promise in the growth of digital assets and blockchain technology to promote financial inclusion and economic mobility. The US House passage of the FIT21 Act signals to the world that the United States is ready to take the lead in setting global standards in this evolving frontier of finance.”
The Blockchain Association, the leading trade association representing the cryptocurrency and blockchain technology industry, celebrated the approval and looks forward to “constructively contributing to sensible policies that enable digital assets and blockchain technology to flourish responsibly in the United States while upholding rigorous consumer protection standards.”
“The House passage of FIT21 represents a watershed moment and badge of Congressional validation for the crypto industry in the United States,” said Kristin Smith, Blockchain Association CEO, in a statement shared with Kitco Crypto. “This bipartisan vote signals that lawmakers on both sides of the aisle recognize the immense potential of blockchain technology and digital assets, while also acknowledging the need for regulatory guidelines to enable responsible innovation and prioritize consumer safeguards.”
“For years, the crypto industry has operated in a regulatory ‘no man’s land,’ with federal agencies claiming jurisdiction via court case instead of open rulemaking and taking aggressive enforcement actions that created confusion and stifled innovation,” the Blockchain Association said. “FIT21 represents Congress reasserting its authority over economic policy and mandating a national regulatory framework tailored specifically for digital assets.”
“While the legislation is not perfect, it tries to strike a balance between fostering transformative innovation and implementing consumer protection measures,” they added.
“While there is still work to be done refining and improving the legislation, we celebrate the House passage of FIT21 and how far the crypto industry has evolved to reach this historic milestone,” Smith said. “The bipartisan momentum behind this bill underscores crypto’s growing political force.”
