US House of Representatives Passes Crypto Regulation Bill

The US House of Representatives has passed a bill on the structure of the cryptocurrency market, known as the FIT21, aimed at regulating the industry as a whole.

The bill received 279 votes in favor and 136 against. The Republican-sponsored bill was supported by 71 Democrats, including former Speaker Nancy Pelosi.

“FIT21 is the first step towards creating a regulatory framework for digital assets, and it needs to be improved by working with the Senate and the administration. As we lay the groundwork for responsible innovation, we must take further steps to enhance consumer, investor, and taxpayer protections,” she stated.

The bill proposes expanding the powers and funding of the Commodity Futures Trading Commission (CFTC) to oversee cryptocurrency spot markets and “digital commodities,” including Bitcoin.

FIT21 also establishes a procedure allowing digital commodities to be traded on the secondary market if they were “initially offered as part of an investment contract.” The bill includes provisions on stablecoins and anti-money laundering measures.

Chairman of the Financial Services Committee Patrick McHenry noted that the Securities and Exchange Commission (SEC) and the CFTC are currently vying for control over the cryptocurrency market.

“They have created an impossible situation where the same firms face competing and conflicting enforcement actions from two different agencies. FIT21 corrects this by creating a regulatory framework that will provide clear rules and reliable boundaries,” the congressman added.

The bill now moves to the Senate for consideration, and if approved, it will be sent to the president for signing. The Biden administration had stated before the vote that it “opposes” FIT21, as it does not provide “sufficient protection for consumers and investors involved in certain digital asset transactions.”

However, the White House noted that it is willing to work with Congress on a “comprehensive and balanced regulatory framework for digital assets.”

According to The Block, the bill also lacks sufficient support in the Senate. Analysts at TD Cowen believe FIT21 is unlikely to be passed by the current Congress.

Criticism of the Bill

Maxine Waters, Vice Chair of the House Financial Services Committee, stated during Rules Committee hearings that FIT21 is “one of the worst bills she has ever seen.”

According to her, FIT21 will lead to “overburdening the CFTC’s resources” and weakening oversight of the crypto industry. The agency has 700 employees, while the SEC employs 4,500 specialists.

Moreover, Waters believes the document does not grant the CFTC sufficient authority to regulate the industry.

SEC Chairman Gary Gensler also opposed FIT21, releasing a statement hours before the vote.

He argues that the bill ignores longstanding precedent in regulating investment contracts, places the agency in a difficult position when certifying self-proclaimed digital commodity issuers, leads to the abandonment of the Howey test, and potentially allows investors to take on excessive risk without appropriate disclosure.

“The list of failures, frauds, and bankruptcies in the crypto industry is not because we lack rules or they are unclear. It is because many players in the crypto industry do not play by them. We must make a policy choice to protect investors, not to facilitate business models of non-compliant firms,” Gensler concluded.

Support for FIT21 in the Industry

Brian Armstrong, co-founder and CEO of the largest US crypto company Coinbase, called the House vote on FIT21 “historic.”

Historic vote today on the FIT21 bill in the House of Representatives, that will finally start to create some clear rules to regulate crypto (if it becomes law).

Americans want to know their representatives are protecting their rights to use crypto, creating clear rules to…

— Brian Armstrong (@brian_armstrong) May 22, 2024

According to him, the document will initiate the creation of “clear rules to regulate cryptocurrencies.”

“Americans want to know that their representatives are protecting their rights to use cryptocurrencies, creating clear rules to protect consumers, and will not allow the lack of clarity to be weaponized by a few activists in government trying to destroy the industry,” he wrote.

Ron Hammond, Director of Government Relations at the Blockchain Association, also called FIT21 a “turning point” in comments to The Block. He noted the significant Democratic support for the bill.

“It seems this not only changes the perception of the industry in Congress before the FIT21 vote but also potentially removes regulatory barriers around which the SEC chairman tried to build his legacy,” he noted.

Hammond suggested that the White House is “beginning to realize” the political consequences of maintaining the previous policy on cryptocurrencies.

Ripple CEO Brad Garlinghouse also pointed to the changing sentiment among the president’s party representatives in Congress.

Well, this certainly HAS aged well!

Today, more than ever, we are seeing what a political liability Gensler has been to the Biden administration.

It’s the reason we saw 71 Dems cross the aisle and support FIT21.

We are just getting started! https://t.co/Ff6x78mgax

— Brad Garlinghouse (@bgarlinghouse) May 22, 2024

“Today, more than ever, we see what a political liability Gensler has been for the Biden administration. This is why we saw 71 Democrats support FIT21. This is just the beginning!” he stated.

Renowned industry lawyer Jake Chervinsky called it a signal to the current president from his faction in the House of Representatives that the “anti-crypto platform” is a losing position this year.

FIT21 passes the House 279 — 136 ?

House Democrats voting in favor of this bill: 71.

That is a *huge* number of elected Democrats voting “no confidence” in the current SEC, and sending a message to the Biden administration that “anti-crypto” is a losing platform this year. pic.twitter.com/zmlD1VRQfF

— Jake Chervinsky (@jchervinsky) May 22, 2024

Amid the US election campaign, criticism of the current government for its stance on cryptocurrencies is growing. Cardano co-founder Charles Hoskinson stated Biden’s desire to “kill the industry.”

ConsenSys CEO Joseph Lubin believes that the SEC, supported by the president and led by Gary Gensler, is deliberately hindering innovation in the US, threatening the future of the country’s financial system.

Hayden Adams, founder of the largest DEX Uniswap, called the administration’s actions a “total war” on the industry. The entrepreneur suggested that Biden could lose the election due to his opposition to cryptocurrencies. Billionaire Mark Cuban expressed a similar opinion.

Biden’s opponent, Donald Trump, has promised support for the industry if elected and has begun accepting campaign donations in digital assets.

In early May, a survey in several states revealed that over 20% of participants identified candidates’ positions on digital assets as key.