FIT21, the first digital asset legislation in the history of the United States, has passed in the House of Representatives with strong bipartisan support. The legislation, which received a two-to-one margin of votes, signifies a willingness from both parties to come together and make policy decisions regarding digital assets. This development suggests a potential shift in the political landscape in Washington, D.C., and indicates that the crypto industry is more organized than ever before. The passage of FIT21 is considered a milestone moment for the U.S. digital asset ecosystem.
While FIT21 was being passed, the Securities and Exchange Commission (SEC) also made notable changes in its stance on cryptocurrencies. The agency approved Ethereum spot-market exchange-traded funds, marking a significant turnaround in its approach. Additionally, a Congressional Review Act vote overturned Staff Accounting Bulletin 121, making it easier for regulated financial institutions to act as custodians of digital assets.
However, one potential issue with FIT21 is its “dual agency” regulatory regime, where digital assets will be regulated by either the SEC or the Commodity Futures Trading Commission (CFTC) based on the decentralization of their underlying networks or projects. This dual-agency structure may cause confusion among market participants. Some view FIT21 as a way to restrict the SEC’s authority over the crypto space, which they believe has hindered innovation in the United States.
Regulating digital assets is a complex task, as they can change their form and function over time. Tokens may fall under the jurisdiction of either the SEC or the CFTC depending on various factors. The SEC has the power to decide whether a system has become decentralized, and historically, it has taken a narrow view on decentralization. FIT21 introduces a new test of “decentralization,” which may lead to differing interpretations and disagreements.
Despite the complexities, many agree that comprehensive crypto regulation is needed in the United States to keep up with other countries that are pulling ahead in this area. FIT21 serves as a framework for crypto supervision, and specific details can be negotiated later. The passage of FIT21 also indicates that U.S. politicians who ignore crypto do so at their own peril, as digital asset regulation is predicted to be a key electoral issue in 2024.
While the chances of FIT21 becoming law in 2024 are uncertain, there is a decent chance of it passing. Democrats, who are losing ground to Republicans in key battleground states, may adopt a more pro-crypto approach to win over Independents. Recent polling shows that one in five voters in swing states considers cryptocurrency a major issue in the election. President Biden’s willingness to work with Congress on a regulatory framework for digital assets without threatening to veto the FIT21 legislation suggests room for negotiation and a potential for a workable legislative solution. Although FIT21 still faces challenges in the Senate, the recent disapproval resolution on SAB 121 indicates that it is not impossible for it to pass.