Democratic Party members of the United States House of Representatives will not be mandated to vote against two Republican-led pro-crypto bills expected to come up for a floor vote soon, despite party leaders expressing strong opposition.
A leaked email dated May 20, shared by Politico, revealed that Democratic leaders have not officially urged members to vote no on the Financial Innovation and Technology for the 21st Century (FIT21) Act and the CBDC Anti-Surveillance State Act, H.R. 4763 and H.R. 5403, respectively. However, they strongly oppose these bills.
Overview of the Bills
Financial Innovation and Technology for the 21st Century (FIT21) Act
The FIT21 Act aims to clarify the process for classifying cryptocurrencies as commodities or securities and predominantly assign regulatory control of the sector to the U.S. Commodity Futures Trading Commission (CFTC). The U.S. crypto industry and lobbyists support the bill, with 60 companies urging the House to pass it in a letter dated May 16.
CBDC Anti-Surveillance State Act
The CBDC Anti-Surveillance State Act seeks to prevent the Federal Reserve from issuing a central bank digital currency (CBDC).
Opposition from Democratic Leaders
The email noted that Representatives Maxine Waters and David Scott strongly oppose the FIT21 Act, with Waters also opposing the CBDC Act. Politico later obtained a letter from the pair urging a vote against FIT21.
Politico reporter Eleanor Mueller reported that House Democratic leaders announced they would not whip against the Republican's crypto bill, referring to FIT21.
Criticisms of FIT21
In the email, Democratic leaders highlighted concerns over parts of the FIT21 Act, particularly its establishment of a process for trading digital commodities in the secondary market if they were initially offered as part of investment contract securities, as defined by the Securities and Exchange Commission (SEC) using the Howey test.
"This language undermines decades of legal precedent and case law, thereby creating uncertainty in our traditional securities market," the email stated.
Leaders also argued that the bill "weakens investor protections and opens the door to fraud and market manipulation" by providing a "safe harbor" for entities to lodge an intent to register, effectively shielding them from the SEC until the SEC and CFTC finalize crypto rules.
Criticisms of the CBDC Anti-Surveillance State Act
The email also criticized the CBDC Anti-Surveillance State Act, arguing that halting CBDCs would undermine the "primacy of the U.S. dollar," especially as other countries developing their own CBDCs seek to evade sanctions.
"According to the Congressional Budget Office (CBO), the bill’s overly broad definition of CBDC raises concerns the bill could undermine the Fed’s ability to conduct monetary policy," the email added. This concern is particularly pressing as the Fed attempts to navigate a soft landing regarding inflation.
Upcoming Debate and Vote
According to Politico’s Mueller, floor debate and passage of FIT21 are expected on Wednesday, May 22. Despite the Democratic leaders' strong opposition, party members are not being forced to vote against the bills, allowing for individual discretion in their votes.
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