The Cryptocurrency Regulation Act is expected to be passed by the House of Representatives

Financial innovations and technology fit for the 21st century^street The Century Act is expected to pass the House of Representatives today after clearing a procedural hurdle by a 204-203 vote. The bill was first proposed in July 2023 and passed out of committees on May 6.

Representative Patrick McHenry of North Carolina and Chairman of the House Financial Services Committee spoke today in defense of the FIT Act at the Investment Company Institute 2024 Leadership Summit, which he sponsors.

The bill would create a regulatory structure for the digital assets industry and has been criticized by Gary Gensler, chairman of the Securities and Exchange Commission. At the conference, McHenry sarcastically described Gensler’s criticism as “shocking” because Gensler is generally known as a harsh critic of the crypto industry.

If passed, the bill, also known as H.R. 4763, would assign regulatory authority to the Commodity Futures Trading Commission over decentralized digital assets, as well as over the spot or cash market for digital commodities. Decentralized is defined in the bill as a crypto asset in which “no person has unilateral authority to control the blockchain or its use and no issuer or associated person has control over 20% or more of the digital asset or the right to vote in the digital asset.” “

The SEC would regulate digital securities that are not decentralized, with additional exceptions for those that limit annual sales or access by non-accredited investors. If passed, the bill would require all digital asset rulemaking to be joint rulemaking between the SEC and CFTC.

Gensler identified some potential problems with the bill in his statement today. He noted that the bill allows cryptocurrency issuers to self-certify that they are decentralized and gives the SEC only 60 days to review and challenge such certification. Gensler said the SEC does not have the staff to review large amounts of digital assets. He also suggested that “stock pump-and-dump schemes and penny stock traders” could falsely claim digital asset status to avoid regulation, and the SEC would only have 60 days to review them.

Representative Sean Casten of Illinois proposed an amendment to the FIT Act that would have extended the deadline to 90 days, but it was not adopted.

Gensler added that the existing rules are clear enough, it’s just that the crypto industry is not willing to follow them: “The crypto industry’s history of failures, frauds and bankruptcies is not due to a lack of rules or because the rules are unclear. This is because many players in the cryptocurrency industry do not follow the rules. We should choose policies to protect investors rather than facilitate the business models of non-compliant companies.”

McHenry responded during an interview with ICI CEO Eric Pan that “we do not have a definition of digital assets at this time” under the law and that the bill would provide regulatory clarity to the industry. McHenry added that “it was the Gensler regime that made things less certain” and that he would continue to focus on “talking to the legislators who actually vote” on the bill.

The White House said in a statement that “The Administration opposes the passage of H.R. 4763, which would impact the regulatory structure for digital assets in the United States,” suggesting that a veto of the bill would be likely if it reached President Joe Biden.

During debate on the bill, Representative Stephen Lynch of Massachusetts, the top Democrat on the House Financial Services Committee’s Digital Assets Subcommittee, called the bill one of the “three worst bills that I have ever seen to come before the House.” ” Other opponents of the bill explained that it does not address the role of cryptocurrencies in financing illegal activity and leaves much of cryptocurrency enforcement to the CFTC, which has traditionally had little experience working with intangible assets or retail markets.

Tags: Crypto assets, Gary Gensler, SEC