US House approves FIT21 crypto bill: Future implications explained

A bill that aims to clarify the regulatory roles of the United States securities and commodities regulator in the crypto industry is making its way to the Senate and, eventually, President Joe Biden’s desk. The bill, known as the Financial Innovation and Technology for the 21st Century Act (FIT21) or H.R. 4763, was passed in the U.S. House of Representatives on May 22. The vote saw 71 Democratic representatives and 208 Republicans in favor, while 136 representatives voted against it. However, its future in the Senate remains uncertain as there is currently no companion bill, and it faces opposition from Senator Elizabeth Warren, who is known for her criticism of cryptocurrencies. Despite this, on May 16, the Senate passed a resolution calling for the removal of a rule that restricts banks and crypto firms from conducting business. The bill still has a long way to go before it becomes law, as it could be assigned to a committee for further review, hearings, and revisions. If it survives this process, it will require a majority vote of at least 51 senators in favor to pass. It is also possible that certain parts of the bill may change as House and Senate members collaborate to reconcile any differences between their versions. Ultimately, the bill will need to go through Congress for final approval. Once it reaches President Biden’s desk, he will have 10 days to either sign or veto it. However, his administration has already expressed opposition to the bill, though it has not indicated whether he would veto it. If Biden does veto FIT21, there is still a chance that the House and Senate could override his veto by passing the bill with a two-thirds majority vote in both chambers. The passage of FIT21 in the House of Representatives has been seen as a significant win for the crypto industry. However, U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler publicly opposed the bill, stating that it introduces “new regulatory gaps” and poses risks to the stability of capital markets. Despite Gensler’s opposition, Coinbase CEO Brian Armstrong hailed the bill’s passage and the support it received from Democrats as a “total victory” and a win for clear regulatory rules in the crypto space. It is worth noting that the bill has drawn criticism from some experts who argue that it would grant the SEC significant regulatory power. Specifically, it would establish a dual regulatory regime, with the Commodity Futures Trading Commission (CFTC) having authority over the spot commodities market. FIT21 is seen as shifting control of the crypto industry to the CFTC, which is perceived as a more lenient regulator compared to the SEC. However, the SEC would still have regulatory power over cryptocurrencies that are not sufficiently decentralized, and the bill would create a pathway for cryptocurrencies classified as securities to be sold as commodities. Overall, the proposed regulations in the bill are driven by lawmakers’ concerns and uncertainties surrounding the crypto industry.