The U.S. House of Representatives on Wednesday passed the Cryptocurrency Friendliness Act (FIT21), which would give oversight authority over cryptocurrencies to government agencies that are perceived as favorable to the cryptocurrency industry.
Its purpose is to establish a new legal structure for digital currencies. This is despite an unusual warning from U.S. securities regulators about the potential for financial risks to materialize.
The House of Representatives approved the Republican-sponsored Financial Innovation and Technology for the 21st Century Act (FIT21) in a bipartisan vote. The final tally was 279-136, with 208 Republicans joining 71 Democrats in supporting the bill.
House approval is just the first hurdle for the new US law. Although the FIT21 Act passed the House, it still needs Senate approval and the President's signature to become law. It is unclear at this point whether the Senate will also pass this bill.
FIT21 cryptocurrency bill expands industry freedoms, transfers authority to CFTC
The bill would give U.S. cryptocurrency operators expanded freedom. It would also strengthen regulatory oversight of digital assets and transfer it to the Commodity Futures Trading Commission (CFTC).
Bringing most digital assets under the CFTC's jurisdiction would classify them as commodities rather than securities, which would shift regulatory oversight away from the SEC. The move is significant, especially given the crackdown on the cryptocurrency industry initiated by the Biden administration under the SEC's jurisdiction.
Passage of the bill could put President Joe Biden in a difficult position. He must decide whether to defy his own SEC chairman and veto his veto. This comes as former President Donald Trump is courting the industry in his 2024 presidential campaign.
After the vote, House Majority Whip Tom Emmer said the law's passage paves the way for digital asset innovation to flourish in the United States.
“This globally competitive framework gives entrepreneurs the clarity and assurance they need to build here in the United States, while ensuring that the next version of the web emulates our values,” he said.
FIT21 is a catalyst for dialogue beyond innovation. It's about national security, consumer protection, and global competitiveness.
It is about shaping what the future global digital economy will look like and how it will work.
Let's give the American people the clarity they need to seize this moment. pic.twitter.com/scdatvjyp5
— Tom Emmer (@GOPMajorityWhip) May 22, 2024
SEC and White House united in opposing FIT21 approach
Before Wednesday's vote, the White House issued a statement saying the FIT21 bill does not go far enough to protect consumers involved in certain virtual currency transactions. However, he refrained from vetoing the bill outright.
Wednesday's House vote also followed SEC Chairman Gary Gensler's criticism of FIT21. Gensler said several aspects of the bill “create new regulatory gaps and undermine decades of precedent regarding the oversight of investment contracts” and could put investors and capital markets at risk. He claimed that there was.
Federal regulators argued that FIT21 violates existing securities laws. He said FIT21 repudiates the long-accepted Howie test and overturns current regulations regarding investment contracts. This will allow virtual currency businesses to “self-certify” their products.
“The crypto industry's record of failure, fraud, and bankruptcy is not because there are no rules or the rules are unclear. It's because many players in the industry don't follow the rules,” Gensler continued.
