The FIT21 Act, or the Financial Innovation and Technology for the 21st Century Act, is a bill that aims to establish a regulatory framework for the U.S. digital asset market. The main goals of the bill include:

  1. Provide a safe and efficient path for blockchain projects to launch in the United States: Ensure that blockchain projects can develop in a clear regulatory environment1113.

  2. Clarify the roles of regulators: Clarify the boundaries between the U.S. Securities and Exchange Commission (SEC) and the U.S. Commodity Futures Trading Commission (CFTC), i.e., which activities are regulated by the SEC and which are regulated by the CFTC, and whether digital assets are classified as securities or commodities1113.

  3. Ensure Oversight of Cryptocurrency Exchanges: Further protect American consumers by enforcing rules for cryptocurrency exchanges. 1113

The FIT21 bill also defines how digital assets should be regulated, depending on whether they are functional and decentralized:

  • If the digital asset’s blockchain or digital ledger is functional and decentralized, the CFTC will regulate it as a commodity.

  • If the blockchain is functional but not decentralized, the SEC will regulate the digital asset as a security.1113

In addition, the bill sets standards for decentralization, including that no one person has unilateral power to control the blockchain or its use, and that no issuer or associated person has 20% or more control over the digital assets or voting rights in the digital assets1113.

The bill also contains consumer protections such as segregation of customer funds, lock-up periods for token insiders, annual sales volume limits, and disclosure requirements 1113.

The introduction of the FIT21 bill is seen as a positive sign for the development of the crypto industry because it provides regulatory certainty, helps innovators build trust with the public, and provide useful products while holding actors with bad intentions more accountable1113. Despite some concerns, such as concerns about the SEC's jurisdiction and concerns about unclear regulatory boundaries, supporters of the bill believe that it will help the crypto industry continue to operate and innovate in the United States1113.