Regulation
Is the House Bill FIT21 Really the Legislation Crypto Needs?
The House voted Wednesday by 279 votes to 136 to pass the much-anticipated Financial Innovation and Technology for the 21st Century (FIT21) Act, which was considered a major victory for the industry given that it is the largest legislation focused on cryptography so far in the United States. The bill, which received support from the vast majority of Republicans as well as 71 Democrats, will now head to the Senate — but probably not this year.
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If passed, the bill would establish a regulatory framework for digital assets, helping to define when a certain token is a security or commodity. Although the bill is largely believed to strengthen crypto oversight by the Commodity Futures Trading Commission, the Securities and Exchange Commission would likely continue to play a significant role in regulating the sector.
Although many have said the bill is something of a turning point for crypto in the United States, not everyone thinks it will go as planned.
“It doesn’t even change agencies; The SEC would still have enormous power. It provides for a dual regulatory regime, shared between the SEC and the CFTC. It does this by giving the CFTC an authority it never had: a regulatory authority over a commodity spot market,” Gabriel Shapiro, crypto legal expert. said the. “Man, we’ve been so psycho about this FIT21 thing.”
“There has never before been a commodity spot market that is *regulated*…we just hand that authority over wholesale trading over to the CFTC and hope they aren’t crazy fascists like Gary (but he was the head of the CFTC lol), “he added.
In other words, the bill is essentially a way for the government to sanction activities that the industry has already carried out without authorization, and potentially create an agency to interfere with what are supposed to be free markets and open.
This was a point echoed by Stephen Palleyanother leading legal voice in crypto, who said he “doesn’t like [it] at all.”
“This unnecessarily creates more jurisdiction for the CFTC over the spot and a walled garden for incumbents, among other things. But you assholes kept asking for new laws,” added Palley, a partner at Brown Rudnick.
Ironically, Shapiro and Palley’s criticisms appear to align with those of Maxine Waters (D-CA), the top Democrat on the House Financial Services Committee, who said it was one of the worst bills of law she had ever seen. In addition to potentially straining the resources of the CFTC, which has only about 700 employees compared to the SEC’s 4,500, it could also undermine other legislative efforts — like the stablecoin bill that Waters is on worked alongside House Financial Services Chairman Patrick McHenry (R-NC). .
“Let me leave you [in] about a secret that big crypto doesn’t want you to know, even under this bill,” The waters said. “The CFTC does not have sufficient authority to regulate crypto in this bill.”
Likewise, SEC Chairman Gary Gensler said the effort would create more confusion and regulatory gaps than it would fill. Gensler has argued for years that the law is clear and that there should not be bespoke rules for crypto.
Regardless, many in the crypto industry viewed the bipartisan vote as a symbolic vote for crypto itself, perhaps a harbinger of a better future. The move comes just days after the House and Senate voted to repeal a controversial SEC accounting rulewhich in itself was seen as a sign that reason would eventually prevail.
While there is a glimmer of hope, many experts believe FIT21 is at risk of dying on the vine. TD Cowen, for example, said a few weeks ago that the bill had “no chance of becoming law in Congress.” So maybe this is a psychological operation worth celebrating?