Written by: MIIX Capital
introduction
The U.S. House Financial Services Committee is pushing for legislation for the 21st Century Financial Innovation and Technology Act, or “FIT21,” and the full House plans to vote on the FIT21 bill this week.
The bill aims to clarify the roles of the U.S. Commodity Futures Trading Commission (CFTC) and the U.S. Securities and Exchange Commission (SEC) in the regulation of crypto assets, specifically how they provide guidance and supervision for crypto assets.
The U.S. digital asset ecosystem has long been plagued by regulatory uncertainty that has stifled innovation and left consumers unprotected.#FIT21will solidify America’s leadership in the global financial system and strengthen our role as an international innovation hub.
— Patrick McHenry (@PatrickMcHenry) May 10, 2024
Overview of FIT21
Introduced in July 2023, FIT21, a bill championed primarily by Congressmen Patrick McHenry and French Hill of the House Financial Services Committee, is a comprehensive market structure bill.
The bill would give the CFTC new jurisdiction over digital commodities and clarify the SEC’s jurisdiction over digital assets offered as part of an investment contract, with the goal of better protecting consumer rights, ensuring that crypto companies have sound rules, and creating clarity for job creators and blockchain builders, preventing companies and investors from moving overseas and ensuring America’s leadership.
At the same time, the bill will further clarify the United States' encryption strategy and provide more reference and protection for the development of the encryption industry.
The bill also establishes a process to allow crypto assets to be traded in secondary markets (if they were originally offered as part of an investment contract) and imposes comprehensive customer disclosure, asset protection, and operational requirements on all entities that need to register with the CFTC and/or SEC.
The main reason for promoting FIT21
First, according to the report: by 2030, crypto technology will create 4 million jobs in the United States, and its growth potential will have a very positive impact on the job market; and currently, there are about 52 million people in the United States holding crypto assets, and there are several million people engaged in crypto asset-related development and non-technical work, of which about 70% have an income of less than $100,000. However, they face various risks due to regulations and supervision, which has become an urgent problem that needs to be solved.
Secondly, 80% of Americans believe that the global financial system unfairly favors powerful interest groups. It is precisely because of the lack of clear regulatory provisions that many developers in the crypto industry leave the United States every year. To change this situation, legislatures and regulators need to be more standardized and provide clear guidance and space for the industry and practitioners.
Finally, the US election is in a fierce game, and cryptocurrencies have attracted much attention because they have become a tool for Biden and Trump to play. It is reported that Biden and Trump have agreed to hold two debates on June 27 and September 10, in which cryptocurrencies may become a topic of discussion. However, no matter who is elected, the risk of polarization in cryptocurrency regulation may be intensified, which may make it more difficult for the two parties to reach a compromise, and it will become a necessity to clarify the legislative framework before the election.
Trump makes regulation "complex", the bill will make things clearer
Trump has called BTC a “scam” in the past, said he would never allow a U.S. central bank to use digital currency, and said he is “not a fan of digital assets.” However, the former president told digital asset supporters and investors in his Mar-a-Lago speech earlier this month that “if you support cryptocurrency, you better voted for Trump,” and when it comes to the digital asset space, he is now “happy with it.”
60 crypto entities promote FIT21, which may become a historical event
In a letter to the leadership of the U.S. House of Representatives on May 16, about 60 companies represented by the Cryptocurrency Innovation Committee (CCI) called on lawmakers to pass the 21st Century Financial Innovation and Technology (FIT21) Act. The letter, whose signatories also include Coinbase, Circle, Block, Kraken, Gemini, Digital Money Group, Galaxy, and Stand With Crypto, urged American voters to contact their representatives and support the bill.
The support and promotion of this organization reflects the urgent need for legislation from U.S. crypto industry institutions and practitioners. If the FIT21 bill is passed, it will be a historic event. It will not only be an improvement and great progress in regulatory policies, but also a sign that the U.S. crypto industry is truly integrated into mainstream society and mainstream consciousness.
“We recognize that FIT21 will create new compliance challenges for crypto-asset firms, but regulatory clarity is undoubtedly more responsible, safer for consumers, and preferable to the status quo,” the CCI said. “Currently, digital asset firms are required to comply in a manner consistent with U.S. securities laws that were designed nearly 100 years ago without taking into account today’s technological advances, including the ability to trade at internet speeds.”
In addition to regulation, FIT21 also helps provide protection in terms of segregating client funds, requiring risk disclosure, expanding bankruptcy protection, imposing minimum capital requirements and addressing conflicts of interest.
FIT21 will be a key issue for the new Congress
With the launch of the BTC spot ETF in the United States, the influence of the crypto industry in the United States has developed rapidly and continued to expand. The FIT21 Act aims to give digital assets greater regulatory certainty and eliminate some gray areas in regulation. As the election game becomes more and more intense, crypto regulation has been the main theme of the US midterm elections and is of great significance.
Judging from recent news, Biden and Trump have also turned more towards major policy changes in regulatory framework intervention to address issues such as consumer protection, financial stability and national security. At the same time, considering cryptocurrencies, the FIT21 bill is very likely to be passed. However, the main theme is still the election, and the polarized attitude of the United States towards cryptocurrencies also makes the bill still uncertain:
The House and Senate overturned the SEC's rules on how banks handle digital assets, the first time this Congress has passed "standalone crypto legislation." Although the bill has bipartisan support in both houses of Congress, U.S. President Joe Biden said he plans to veto the bill;
Trump’s mercurial personality and past misleading maneuvers make it hard to determine whether he will stick with cryptocurrencies and push the bill through if he wins in November.
The banking industry in the Senate may not have done enough preparation for the Senate to pass the legislation, and the attitude of lawmakers is still unclear. It is still unknown whether they will follow the previous overturn of SEC regulations and pass FIT21;
Both Republicans and Democrats are staunch supporters of the bill, and the passage of FIT21 is already a high probability event. However, with the election approaching and polarized attitudes still the same, the priority of the House of Representatives cannot be guaranteed, because the bill must pass the other house and then be approved by President Joe Biden before it can take effect. Therefore, after the passage of the FIT21 bill, it may not become law in this Congress, but will become a key issue in the work of Congress in 2025/26, when efforts will need to be renewed to formulate crypto market structure legislation and shift the focus to the Senate to promote the implementation of the bill.
Summarize
The passage of the FIT21 Act is a landmark legislation that will be a key event in the regulation of the crypto industry in the United States. The votes of Democrats and Republicans in the House of Representatives and the Senate may reveal how lawmakers view the crypto industry and crypto assets. The passage of the bill will further consolidate the United States' leadership in the global financial system in the coming decades and strengthen its role as an international innovation center.
Note: All the above opinions are for reference only. What do you think of the proposed FIT21 bill and its impact on the future of digital asset regulation in the United States? Feel free to contact us for corrections.
