Today, a bipartisan group of lawmakers, including Chairman of the House Financial Services Committee Patrick McHenry (NC-10), Chairman of the House Committee on Agriculture Glenn “GT” Thompson (PA-15), Chairman of the Digital Assets, Financial Technology and Inclusion Subcommittee French Hill (AR-02), and Chairman of the Commodity Markets, Digital Assets, and Rural Development Subcommittee Dusty Johnson (SD-AL), have addressed Treasury Secretary Janet Yellen regarding the urgent need to address regulatory gaps in the spot market for digital assets that are not securities.
Despite the acknowledgment of these gaps, regulators have yet to create an environment conducive to ensuring consumer protection and promoting innovation in digital assets within the United States. The bipartisan FIT for the 21st Century Act has been proposed as a solution to provide much-needed clarity and certainty to digital asset spot markets.
The lawmakers' letter to Secretary Yellen emphasizes the necessity of addressing regulatory limitations in the digital asset market, particularly in light of recent events such as the collapse of FTX. This collapse prompted the House Committees on Agriculture and Financial Services to collaborate on the Financial Innovation and Technology Act for the 21st Century (FIT21). This legislation aims to grant federal regulators clear authority over digital asset spot markets, ensuring that customer protections are in place for intermediaries and digital asset-related activities.
SEC Chair Gensler's remarks in 2021 underscored the importance of congressional action to enhance investor protection in crypto exchanges, highlighting the current lack of federal authority in this regard. Furthermore, Chairman Behnam's testimony before the House Committee on Agriculture emphasized the urgency of addressing regulatory gaps, particularly in the wake of bankruptcies and alleged manipulative trading activities within the digital asset market.
The FIT21 Act addresses these concerns by providing the CFTC with jurisdiction over non-security digital asset spot markets and clarifying the SEC's jurisdiction over digital assets offered as investment contracts. Additionally, the legislation imposes robust customer protections on entities required to be registered with the SEC and CFTC.
Despite ongoing regulatory gaps, digital asset firms continue to operate, leading to potential risks for consumers. FIT21 seeks to rectify this situation by providing comprehensive oversight of non-security digital asset spot markets, aligning with the recommendations put forth by FSOC and addressing the concerns raised by regulators and lawmakers alike.