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The cryptocurrency space scored a huge win in Washington this past week, when the House of Representatives voted in favor of a bill designed to establish a framework for digital assets and clarify regulators’ respective jurisdictions. However, the legislation – called the Financial Innovation and Technology for the 21st Century Act, or FIT21 – still needs approval from the Senate, the expectation of which is low.
The U.S. House cast their ballots overwhelmingly in support of FIT21, recording a 279-136 vote.
President Joe Biden opposed the passage of the bill, though, as it falls short of “sufficient protections for consumers and investors who engage in certain digital asset transactions,” according to a statement. Also against the legislation, Gary Gensler, chair of the Securities and Exchange Commission, contended it was unnecessary and posed a risk to current securities regulations.
“We believe such a strong support from the Democrats for this highly important bill highlights the increasingly bipartisan nature of crypto policy, and sends out a message that status quo isn’t working,” Oppenheimer analyst Owen Lau wrote in a note to clients.
A central component of FIT21 is its proposal to elevate the Commodity Futures Trading Commission to a primary overseer of digital assets. The agency would also hold exclusive regulatory authority over cash or spot markets for so-called digital commodities. The SEC’s regulatory purview, meantime, would extend to digital assets with non-decentralized blockchains. The securities regulator would also be responsible for new rulemaking processes for digital asset trading systems.
This regulatory regime is precisely what the crypto world has been yearning for over the years, as there would be distinct boundaries defining what falls under the jurisdiction of the CFTC versus the SEC.
There has been a years-long debate over whether cryptos should be considered securities or commodities, suggesting the current oversight of crypto in the U.S. lacks a common ground. If a digital token is classified as a security, issuers and exchanges would come under stricter rules enforced by the SEC (e.g., required to possess necessary securities licenses), a prospect the crypto industry has long been fighting against. The SEC defines most cryptos as securities, but the CFTC views them as commodities. The SEC and CFTC both view bitcoin (BTC-USD) as a commodity, though the classification of ethereum (ETH-USD) is less certain among the two regulators.
Rep. Josh Gottenheimer (D-NJ), one of the Democrats who stood firm against the opposition from the White House and the SEC’s Gensler, said FIT21 “clarifies regulation for digital assets, bolsters consumer protection, and ensures America continues to lead with these innovative technologies.”
In the meantime, the extent of opposition the bill might encounter in the Senate remains uncertain. Oppenheimer’s Lau reckons “the expectation to pass the Senate is still low at this point, given the lack of similar work being done in Senate, and the absence of a counterpart bill.”
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