The final passage of the FIT21 Act is one of the strong positives for the current crypto market.
Currently, the House of Representatives has passed, and the Republican majority in favor will dominate the next four-year cycle.
The next stage is whether the Senate can pass it.
The classification criteria for digital assets in the FIT21 Act are very important, detailed as follows:
[Investment Contract (Howey Test): If the purchase of digital assets is viewed as an investment,
If investors expect to profit through the efforts of others or third parties, then the asset may be considered a security.
This is based on the standards established by the U.S. Supreme Court in the SEC v. W.J. Howey Co. case.
[Use and Consumption: If digital assets are primarily used to purchase goods or services rather than as investment tools, they may be classified as commodities. For example, tokens used to obtain specific services, even if speculatively held in the market, are not primarily intended for investment.
[Degree of Decentralization: The bill specifically focuses on the degree of decentralization of the network behind the digital asset. If the network is highly decentralized with no central authority control, the asset is more likely to be considered a commodity. This has significant implications for its regulatory approach.
- Control and influence: No individual or entity has been able to unilaterally control or significantly alter the functionality of the blockchain system in the past 12 months.
- Ownership Distribution: Affiliated individuals or entities do not hold more than 20% of the total digital assets in the past 12 months.
- Voting rights and governance: Affiliated individuals or entities cannot unilaterally influence more than 20% of the voting rights.
- Code Contribution and Modification: In the past 3 months, the issuer or affiliates have not made substantial, unilateral modifications to the source code, except for security or technical improvements.
- Marketing and Promotion: In the past 3 months, the issuer has not promoted digital assets as investment tools.
[Functions and Technical Features: The creation, issuance, trading, and management methods of digital assets, as well as their connection to underlying blockchain technology, are also key determinants of their regulatory direction.
Additionally, the bill provides detailed regulations on the marketing and sales methods of digital assets, which are also very important:
[Registration and Regulatory Responsibility: Depending on the classification of digital assets, regulatory responsibility lies with the Commodity Futures Trading Commission (CFTC) or the Securities and Exchange Commission (SEC).
[Lock-up Period for Insiders: Digital assets held by affiliated persons must be locked for at least 12 months from the date of acquisition or 12 months from the asset's maturity date, whichever is later.
[Affiliate Sales Restrictions: Digital assets sold by affiliated persons within any 3-month period must not exceed 1% of the total circulating amount; if it exceeds 1%, it must be reported to the CFTC or SEC immediately.
[Project Information Disclosure Requirements: Issuers must disclose detailed project information on a public website, including asset nature, risks, development status, etc., to enhance market transparency.
[Customer Fund Security Isolation: Digital asset exchanges must ensure the safety of customer funds to prevent losses or access delays.
[Independent Fund Management: Client funds must not be mixed with company operational funds and must be strictly managed separately to avoid unauthorized activities.
The FIT21 Act can be said to provide a clear regulatory framework for the digital asset field while encouraging technological innovation alongside regulation.
Of course, even if the bill is passed, the regulatory concepts in the next four years may still have two extreme possibilities:
1. Completely free-range, no intervention in development.
2. Develop new, more rigorous and detailed
