Historic cryptocurrency regulation bill passes the House on a bipartisan vote

The House voted to advance bipartisan legislation to create a regulatory framework for cryptocurrencies.

The House voted 279-136 to approve the long-awaited legislation, which now heads to the Senate, where the outlook is uncertain. The Financial Innovation and Technology for the 21st Century Act, known as FIT21, aims to ensure transparency in digital asset regulations and protect consumers and investors.

House Financial Services Committee Chairman Patrick McHenry (R-NC) co-sponsored the bill and said FIT21 is “the culmination of years of bipartisan efforts to finally bring transparency.” He said it would undercut some of the regulatory uncertainty that has hurt the cryptocurrency world.

“This legislation will solidify American leadership in the global financial system for decades to come and strengthen our role as an international center for innovation,” McHenry said. “I look forward to taking this monumental step to finally provide the transparency, accountability and consumer protections that the digital asset ecosystem desperately needs.”

The bill provides the Commodity Futures Trading Commission with new regulatory jurisdiction over digital goods and further clarifies the Securities and Exchange Commission’s authority over cryptocurrencies offered as part of an investment treaty.

The legislation would give the CFTC regulatory authority over digital assets that have functional blockchains but which are decentralized, meaning that no single person or entity has “unilateral authority” to control the operation of or access to a blockchain. For example, Bitcoin, the most widely used cryptocurrency, will fall under this umbrella.

On the other hand, according to the Congressional Research Service, the SEC would be given regulatory authority over digital assets if “the associated blockchain was functional but not decentralized.” For example, digital assets owned by cryptocurrency exchanges that themselves have large holdings would be subject to SEC supervision.

The legislation would also establish a process to enable secondary market trading of digital goods when they were first offered as part of an investment treaty. Additionally, it imposes “comprehensive customer disclosure, asset protection and operational requirements” on entities that must register with the CFTC or SEC.

Creators of digital assets and cryptocurrencies must be required to provide accurate and appropriate disclosures about ownership and structure. In addition, entities such as exchanges and brokers will be obliged to provide customers with important information.

“Our collective effort provides the necessary transparency and security needed to support innovation and position our nation in the global technology revolution,” said Glenn Thompson, chairman of the House Agriculture Committee.

The bill had support from outside crypto groups and advocates for maintaining and growing the digital asset space.

Last week, the Crypto Council for Innovation sent a letter to House Speaker Mike Johnson and House Minority Leader Hakeem Jeffries, urging House members to support the legislation. Nearly 60 groups signed the correspondence, including developers, start-ups and the largest cryptocurrency companies.

“By adopting this legislation, we can accelerate the development of blockchain technology and digital assets, supporting financial inclusion and protecting national security,” the letter reads. “It is critical for the United States to maintain its position as a leader in financial innovation.”

It’s unclear how the bill will fare in the Senate or whether President Joe Biden intends to sign it. The White House issued a statement Wednesday saying the bill lacked “sufficient consumer and investor protections” but stopped short of threatening a veto.

If enacted into law, it would be the most comprehensive regulatory framework for the crypto industry in congressional history to date.

Speaking to reporters Tuesday before the vote, McHenry said the bill had likely gained more momentum and support in the past few months since its introduction. First, he said more of his colleagues understand digital assets and their importance than last July.

“We have more real-world digital use cases today than we had last July,” McHenry added.

McHenry said many places in the world the U.S. competes with have a more competitive regulatory system, and U.S. companies say they “prefer to go to Europe and innovate” rather than do it domestically.

“Which is the stupidest and craziest thing I’ve ever heard. We have never fallen behind Europe in innovation, at least not in the last 150 years,” said the North Carolina congressman.

As for movement in the Senate, Thompson said Thursday that the chamber has passed a very comprehensive piece of legislation to start with that Republicans will be able to advance in the House on a bipartisan basis.

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However, there is a risk that the Senate will not be able to pass this bill before the elections. In that case, French Hill (R-AR), who chairs the Digital Assets Subcommittee, said he has no doubt that the Digital Assets Framework will be “paramount” to the committee’s actions at the beginning of the next session of Congress.

“From day one, we developed consensus and direction on a bipartisan basis,” Hill told reporters.