The Chamber adopted the Cryptocurrency Act, which is of key importance for the industry. His future is unclear.

The bill, called the Financial Innovation and Technology for the 21st Century Act, or FIT 21, creates the possibility of exempting cryptocurrencies from many securities laws if, among other things, they achieve a sufficient level of decentralization. This is in contrast to the way the Securities and Exchange Commission currently polices cryptocurrencies and would likely mean that much of the industry would fall outside the agency’s purview.

Now the proposed bill goes to the Senate, where its fate is uncertain. Unlike the House, the Democrat-controlled Senate has spent very little time on cryptocurrency issues and has no bill ready to go along with what the House just passed. Given the limited time on the calendar before the election season, the most likely outcome this year is that the Senate will not take up cryptocurrency legislation at all.

But Wednesday’s vote was still a positive sign for the prospects of introducing a similar bill next year and a blow to some progressive groups that opposed it.

To see the importance of the vote, just look at SEC Chairman Gary Gensler’s statement issued Wednesday morning.

FIT 21 “would create new regulatory gaps and undermine decades of precedent for the supervision of investment treaties, exposing investors and capital markets to immeasurable risks,” Gensler said.

It’s rare for the agency’s head to publicly speak directly about pending regulations. The statement echoes concerns in progressive circles that some lawmakers are abandoning long-standing concerns about the potential harm that cryptocurrencies could cause to consumers, following a fierce lobbying campaign and massive campaign donations from industry leaders including Coinbase Global
.

“What’s happening here is that political money is outweighing good policy,” Mark Hays, senior policy analyst at Americans for Financial Reform, said before the vote. “When you know that a cryptocurrency super PAC may spend $1 million on your campaign in October, it shouldn’t change your political choices, but it does have an impact.”

On Wednesday, the White House issued a statement opposing the bill, citing insufficient investor protection, but did not threaten to veto it. He said he looks forward to working with Congress on digital asset legislation.

Earlier this week, Americans for Financial Reform and dozens of other organizations, including major labor organizations like the AFL-CIO, sent a letter to House leaders urging them to vote against the bill. They wrote that FIT 21 would not only insulate cryptocurrencies from most securities laws, but would create loopholes that Wall Street firms could exploit to avoid oversight of traditional investment products.

Coinbase and other companies have donated tens of millions of dollars to cryptocurrency committees, making them one of the best-funded forces so far in the 2024 campaign. The industry says FIT 21 would help crypto companies thrive in the U.S. by creating a clear path for them to do business without running afoul of regulations relating to securities that they believe cannot be complied with.

In an interview earlier this week, Coinbase’s head of U.S. policy, Kara Calvert, said the vote was a sign of the industry’s influence in Washington and that lawmakers were noticing that more voters owned cryptocurrencies. She said the bill still gives the SEC a strong role in policing cryptocurrencies.

Coinbase and many other companies are also fighting battles with the SEC. Last year, the agency sued Coinbase and other trading platforms for operating unregistered securities exchanges. The company denies the allegations and is fighting them in court. If Coinbase loses, it will likely have to delist some tokens and stop offering some products to US investors.

The bill could become the springboard for a new legislative effort next year, especially if former President Donald Trump takes the White House. On Tuesday, the Trump campaign said it would begin accepting cryptocurrency donations, a symbolic move that shows how close his party has become to the sector’s interests.

The cryptocurrency industry is unlikely to introduce its favorite regulatory regime this year, but Wednesday’s vote goes a long way toward setting the stage for the future.

Write to Joe Light at [email protected]