Regulation
US House of Representatives set to vote on decentralization bill
Last updated: May 21, 2024, 1:39 p.m. EDT | 2 minutes of reading
The U.S. House of Representatives will vote this week on the highly anticipated decentralization bill, officially titled the “Financial Innovation and Technology for the 21st Century Act” (FIT21). Experts believe this legislation could clarify and streamline cryptocurrency regulation for traders and investors in the United States.
US Decentralization Bill Will Bring Clarity to Blockchain Projects
THE US Decentralization Bill (HR 4763) is expected to be voted on in the House this week. Although facing an uphill battle in the Senate and the possibility of a presidential veto, the effort represents the most important step in establishing a comprehensive U.S. regulatory framework for digital assets.
🚨JUST IN: The US Congress will vote on a FIT21 bill by the end of the month.
This bill defines blockchain decentralization as “no issuer or affiliated person has control of more than 20% of the digital asset or the voting power of the asset.”
This will force… pic.twitter.com/6VKax5hVof
—SolanaFloor | Powered by Step Finance (@SolanaFloor) May 21, 2024
The organizing principle of the bill is to clearly define the regulatory responsibilities of the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) to regulate crypto transactions.
The distribution of responsibilities depends on several factors, such as the decentralization and functionality of the blockchain system associated with the digital asset, how the asset was acquired, and the holders of the digital asset.
These factors determine whether a digital asset is classified as a “restricted digital asset” subject to SEC rules or a “digital commodity” under CFTC jurisdiction.
🇫🇷The US House of Representatives will vote on bill HR4763 by the end of the month, distinguishing the following points.
🔹CFTC-regulates crypto as a commodity if its blockchain is functional and decentralized
🔹SEC regulates crypto as security if its blockchain is not decentralized– Telo News (@Telo_Official) May 21, 2024
FIT21 seeks to regulate digital assets from their creation. Before a functioning system existed, SEC-style disclosure-based regulations would apply to transactions such as ICOs.
Potential buyers would receive information to evaluate unproven digital assets.
Meanwhile, the The Blockchain Association requested a vote in the Plenary Chamber on the U.S. decentralization bill in a May 20 letter to House Speaker Mike Johnson and Minority Leader Hakeem Jeffries.
1/ Today, @BlockchainAssn members sent a letter to @SpeakerJohnson And @RepJeffries in favor of a vote in favor of the Financial Innovation and Technology for the 21st Century Act (#FIT21).https://t.co/RhBfe9Gg5p pic.twitter.com/BUoEnoOEAD
– Blockchain Association (@BlockchainAssn) May 20, 2024
The letter, signed by prominent crypto companies including Ripple, Kraken and Circle, highlights the need for legislation providing a framework for innovation, regulatory clarity for US operators and protection for users and consumers .
“We, the undersigned, write to you today to express our support for a floor vote for H.R. 4763, the Financial Innovation and Technology for the 21st Century (FIT21) Act,” the letter said. “The undersigned represent the diverse blockchain and digital assets sector – including technology startups, small business services companies, infrastructure providers, regulated institutions and investors – working together to support national policy and a regulatory framework favorable to innovation.
US Decentralization Bill Grants Issuance of US SEC Certification
In addition to dividing regulatory responsibilities, the US decentralization bill establishes a certification process for blockchain systems to be treated as decentralized entities. Once certified, the digital asset becomes a “digital product,” exempt from SEC regulation.
At this point, the regulatory framework shifts to CFTC-style standards of conduct. As a digital commodity, non-initiates can freely trade the digital asset on CFTC-regulated digital commodity exchanges and through CFTC-regulated spot transactions. Insiders also benefit from greater flexibility in trading digital products, although some restrictions may still apply to specific insiders, such as issuers.
If the FIT21 Act passes, it will provide much-needed clarity to crypto regulations in the United States. The SEC enforces rules without clear guidelines, causing uncertainty and tension in the industry. The financial watchdog has taken on all major crypto players in the country, alleging unlicensed operations and unregistered securities offerings.
Remember that the The SEC filed a complaint against Coinbase in June 2023 for allegedly operating as an unregistered securities exchange, broker-dealer and clearing agency. The exchange had, in turn, sued the SEC for refusing crypto regulation due to its constant crackdown on crypto companies. This also resulted in Coinbase General Counsel Paul Grewal Rallies Major Exchanges to Question SEC Actionswhich can have serious implications for the crypto industry.