US House of Representatives approves bill providing regulatory clarity for cryptocurrencies, fate in the Senate is uncertain

(Kitco News) – In a late vote Wednesday, the U.S. House of Representatives passed H.R. 4763, also known as the Financial Innovation and Technology for the 21st Century (FIT21) Act, setting the stage for the bill to go to the Senate.

FIT21 aims to provide regulatory clarity for digital assets by defining the role of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) in relation to digital assets. It would also help clarify the process of classifying whether a cryptocurrency is a commodity or security, and would give the CFTC most of its regulatory control over the sector.

“The legislation gives the CFTC new jurisdiction over digital goods and clarifies the SEC’s jurisdiction over digital assets offered under an investment treaty,” a House Financial Services Committee press release stated. “Additionally, the bill establishes a procedure to allow secondary trading in digital goods if they were originally offered as part of an investment agreement. Finally, H.R. 4763 imposes comprehensive customer disclosure, asset safeguarding, and operational requirements on all entities that are required to register with the CFTC and/or SEC.”

The bill has gained increasing support in recent weeks, with 71 Democrats joining the 208 Republicans who voted for the bill.

“Today, the House took a historic step by passing FIT21 with broad, bipartisan support,” said House Financial Services Committee Chairman Patrick McHenry (R-NC). “FIT21 provides regulatory clarity and robust consumer protections necessary for the healthy development of the digital asset ecosystem in the United States. The bill also ensures that America will lead the financial system of the future and remain a center of technological innovation.”

President Biden issued a statement ahead of the vote urging lawmakers to reject the legislation, warning that it would “impact the regulatory structure for digital assets in the United States” and that it “lacks protections for consumers and investors who engage in certain transactions involving digital assets “in their current form.

But his recusal request was rejected by Republicans and dozens of Democrats, including several high-profile figures such as former House Speaker Nancy Pelosi (D-Calif.).

The bill now heads to the Senate, where its fate is uncertain because it has no companion bill and faces one of the nation’s biggest critics of cryptocurrencies, Sen. Elizabeth Warren (D-MA).

The recent Senate confirmation of H.J.Res. 109, the resolution invalidating SEC Staff Accounting Bulletin No. 121, gave many reason to hope that FIT21 would be approved by the Senate. However, it could still be months before the body considers FIT21 because there is no time limit on when senators must act on it.

Once it reaches the Senate, the bill will likely be referred to a committee for possible rounds of reviews, hearings and amendments. After its completion, it must receive the support of a majority of at least 51 senators to be adopted.

Parts of the bill could likely change as members of the House and Senate clarify any differences in their versions of the bill. Once they have finalized language, it will have to go back to Congress for final approval. If approved, President Biden will have ten days to sign or veto FIT21.

“Approval of FIT21 is necessary to ensure the stability and transparency of the digital asset ecosystem,” said Rep. Dusty Johnson (R-SD). “Without this bill, digital content innovation will remain fraught with uncertainty. Today’s victory brings us one step closer to establishing clear rules for developers in the industry, so America can remain a global center for technological and financial innovation. I hope that the Senate will consider this bill soon so that we can finalize this necessary framework.”

For those in the digital asset arena who have been imploring the U.S. government to provide more transparency regarding cryptocurrencies, the approval was a welcome sight.

“The bipartisan passage of H.R. 4763, the Financial Innovation and Technology for the 21st Century Act (the “FIT21 Act”), is a welcome step toward building our next generation financial infrastructure,” said Nicole Valentine, director of financial technology at the Milken Institute, in note for Kitco Crypto. “Regulatory certainty and transparency around financial innovation are critical to the growth, competitiveness, and resilience of the U.S. financial system.”

“The FIT21 Act supports responsible innovation in digital assets and provides the transparency and guidance needed to innovate, build and invest with a degree of certainty,” she added. “We see promise in the growth of digital assets and blockchain technologies to promote financial inclusion and economic mobility. The passage of the FIT21 bill by the House of Representatives signals to the world that the United States is ready to take a leading role in setting global standards in this evolving field of finance.

The Blockchain Association, the leading trade association representing the cryptocurrency and blockchain industries, celebrated the approval and looks forward to “constructively contributing to sound policy that enables the responsible development of digital assets and blockchain technologies in the United States while maintaining rigorous consumer protection standards.” “

“The FIT21 resolution in the House of Representatives represents a landmark moment and a badge of congressional approval of the cryptocurrency industry in the United States,” Kristin Smith, CEO of the Blockchain Association, said in a statement shared with Kitco Crypto. “This bipartisan vote signals that lawmakers on both sides of the aisle recognize the enormous potential of blockchain technology and digital assets, while recognizing the need for regulatory guidance to enable responsible innovation and prioritize consumer protections.”

“For years, the cryptocurrency industry has operated in a regulatory no man’s land, with federal agencies asserting jurisdiction through litigation rather than open rulemaking and aggressive enforcement actions that have created confusion and stifled innovation,” the Blockchain Association said. “FIT21 represents Congress asserting its authority over economic policy and establishing a national regulatory framework tailored specifically for digital assets.”

“While the legislation is not perfect, it seeks to strike a balance between supporting transformative innovation and implementing consumer protection measures,” they added.

“While there is still much work to be done to refine and improve the legislation, we celebrate the House’s passage of FIT21 and how far the cryptocurrency industry has come to achieve this historic milestone,” Smith said. “The bipartisan momentum behind this bill underscores the growing political power of cryptocurrencies.”