WATERSHED MOMENT: FIT21 Bill for Crypto Amid CFTC-SEC Tension
4 min read
WATERSHED MOMENT: FIT21 Bill for Crypto Amid CFTC-SEC Tension
FIT21 marks a historic milestone as the first-ever piece of digital asset legislation to clear a chamber of the United States Congress. The House of Representatives passed the bill with substantial bipartisan backing, with 71 Democrats aligning with 208 Republicans, doubling the number of opposing votes. “The broad bipartisan support for FIT21 last week signifies Congress’s intention to steer digital asset policy, not the SEC,” said Kristin Smith, CEO of the Blockchain Association.
Smith also noted that this victory could be indicative of a shifting political climate in the nation’s capital. “The crypto sector is better organized than ever before, with all the necessary components in place to push for intelligent policy,” Smith added. The passage of FIT21, described by the House Financial Service Committee as a “watershed moment for the U.S. digital asset ecosystem,” suggests more collaboration across political lines than initially anticipated. A notable highlight was the endorsement of the bill by a third of the House Democrats, including Speaker Emerita Nancy Pelosi.
Almost simultaneously, the SEC made a significant policy shift by approving Ethereum spot-market exchange-traded funds. Zach Zweihorn, a partner at Davis Polk law firm, noted this as a dramatic change in stance by the agency, especially in light of the Congressional Review Act vote to overturn Staff Accounting Bulletin 121. This vote received 60 endorsements in the Senate and included prominent Democratic support, easing the pathway for custodial activities in digital asset management by highly regulated financial entities.
Despite the praise, FIT21’s “dual-agency” regulation model could introduce some friction. Digital assets fall under the purview of either the SEC or the Commodity Futures Trading Commission (CFTC), contingent on the decentralized nature of their networks. While the CFTC would oversee decentralized assets like Bitcoin, the SEC might handle tokens created for capital-raising initiatives, such as initial coin offerings. “The dual regulatory framework could confuse market participants. We hope the Senate will delve deeper into this as they draft their legislation,” Smith said.
Supporters see the dual-agency system as a way to limit the SEC’s influence over the burgeoning crypto industry. “FIT21 should restrain some of the SEC’s overreach,” stated Kadan Stadelmann, CTO of Komodo. The legislation aims to clarify the SEC’s jurisdiction, a relief to many who view the current leadership’s approach as overly restrictive. Some experts agree, including Jack Solowey from the Cato Institute, who noted the framework imposes limits on the SEC’s authority, a significant step toward clarity in an otherwise opaque regulatory landscape.
Regulating digital assets is inherently complex because their characteristics can evolve. Matthew Le Merle from Blockchain Coinvestors explained how a token might start as a security and transition into a commodity once its network decentralizes. For instance, Polkadot’s native coin initially fit the definition of a security but is now seen as software. This variability makes regulatory categorizations challenging, as noted by Zweihorn, who highlighted the complexity of determining whether a project is a decentralized system.
The SEC retains the authority, subject to judicial review, to decide which systems have achieved decentralization. This authority causes concern among some in the crypto community, as it maintains significant power with the SEC. Attorney Gabriel Shapiro emphasized that the legislation still grants considerable regulatory power to the agency. Most cryptocurrencies are presumed to be commodities by default, although maintaining this status involves meeting stringent decentralization criteria.
The passage of FIT21 has also introduced the first statutory test of “decentralization.” This new test is expected to be open to varying interpretations, leading to potential disagreements. Despite these complications, there seems to be consensus on the necessity of comprehensive crypto regulation in the U.S., especially as other regions like the EU, Switzerland, and Singapore forge ahead.
The political landscape that FIT21 has revealed may force U.S. politicians to take a stronger stance on crypto. Jake Chervinsky from Variant Funds pointed out that FIT21 sends a clear signal to the Biden administration that an anti-crypto position may be politically untenable. Others like Le Merle believe that the anti-crypto stance of current leaders has already harmed U.S. innovation and competitiveness. A recent Blockchain Coinvestors report predicted that digital asset regulation could become a significant electoral issue in 2024.
Pragmatically, FIT21, though still a framework, appears to be a response to a growing demand for clarity in crypto regulations. Blockchain Association’s Smith said that over 50 million Americans involved in crypto are more vocal, and Washington is beginning to pay attention. Solowey from the Cato Institute noted that even among progressives, the notion that an anti-crypto stance is electorally beneficial is being challenged.
As for FIT21 becoming law in 2024, opinions are varied. While some, like Solowey, see the legislative timeline as a potential obstacle, others, like Stadelmann, are more optimistic, citing shifting political attitudes and polling data showing increased voter interest in crypto issues. Zweihorn added that the absence of a veto threat from President Biden signals potential for bipartisan negotiation. Even with the challenges ahead, the movement represents shifting winds in Washington toward more comprehensive digital asset legislation.
The new statutory test of ‘decentralization’ is going to lead to endless legal battles. 👩⚖️ Not a milestone, more like a moo point.
Great news! The passing of FIT21 signals a new era for crypto regulation in the US. Let’s keep up the momentum!
Fantastic! FIT21 is a major milestone for crypto regulation. Proud of Congress for recognizing the importance of digital asset policies.
Bipartisan support for FIT21 is a sign of the times the future of digital assets is bright, and Congress is on board!
Seeing FIT21 pass with overwhelming bipartisan support is a breath of fresh air. A huge step towards smarter crypto policies!
Such fantastic news! FIT21 marks a new era for digital asset regulation in the US. Kudos to everyone involved!
The proclamation of a victory overlooks the nuances and complications that will likely arise from implementing FIT21.
The dual-agency framework is going to create friction and slow down innovation.
Historic indeed! FIT21’s success in the House is a big win for the entire digital asset community. Here’s to more progress!
Great to see Congress taking the reins on digital asset policy with FIT21. This is the leadership we needed!
What an outstanding milestone! FIT21’s passage through the House shows a promising future for the digital asset ecosystem. Keep it up!
Is anyone really fooled by this ‘bipartisan’ nonsense? This just opens the door to more political drama. 🙄
Seeing FIT21 pass the House is a huge step forward. The crypto ecosystem is better organized and stronger than ever! 💪🌐
The passing of FIT21 is monumental. A clear indication that crypto regulation is being taken seriously. Proud moment for all!
Well done, Congress! FIT21 lays a strong foundation for sensible crypto regulation. Proud to see such a positive political shift.
FIT21 passing the House is a strong signal of the changing political landscape towards crypto. Here’s to continued progress!
The most significant thing here is the confusion and uncertainty it brings. Not exactly a ‘watershed moment.’
Introducing complexity doesn’t solve anything; it just makes it harder for legitimate businesses to operate.
FIT21 might sound good, but it’s just another layer of bureaucracy. Why can’t we have clearer, simpler regulations?
This kind of legislation is moving too fast without considering the long-term impacts on the crypto industry.
Congrats to the Blockchain Association and all supporters of FIT21. This bill is a giant step towards better crypto regulations.
The SEC still retains too much power! What’s the point of FIT21 if it doesn’t really cut down on the SEC’s reach? 🤦♂️
So, we’re just going to put our trust in the SEC and the CFTC? Neither has a stellar track record.
The overwhelming bipartisan support for FIT21 is a game-changer. This is a giant leap for the crypto sector!
Passage of FIT21 is just the beginning of smarter crypto regulation in the US. It’s exciting to see such strong bipartisan support!
This legislation might be more about optics than substance. 🧐 Just another example of Congress patting itself on the back.
Great news from Capitol Hill! FIT21 passing the House with such broad support bodes well for future crypto regulations. 🙌🏛️
Bravo to the House for passing FIT21! This is leadership in action, paving the way for innovative and sensible crypto regulations.
This ‘historic milestone’ is just setting us up for more regulatory headaches in the future.
Impressive bipartisan support for FIT21 this is a win for innovation and cooperation. Looking forward to the Senate’s actions!
Kudos to the House for passing FIT21! A huge step forward for the digital asset ecosystem. This is what progress looks like! 🌉💡
Incredible to witness FIT21 pass with such substantial support. This marks a watershed moment for US crypto policy!
This dual-agency regulation model is a mess. It’s just going to confuse everyone in the market.
Thrilled to see Congress stepping up with FIT21. With bipartisan backing, we’re paving the way for smarter crypto policies.
So encouraging to see bipartisan support for FIT21! It’s clear that comprehensive crypto regulation is on the horizon. Amazing! 🌐⚖️
FIT21’s passage is a testament to the growing recognition of the importance of digital assets. Kudos to Congress! 🌟🔐
Incredible to see FIT21 garner such bipartisan support in the House! This is a significant victory for clarity in digital asset regulation.
So proud to see FIT21 pass! This is a testament to the power of bipartisan cooperation and the rise of sensible crypto regulation.
Great, more rules and regulations that make it harder for the average person to understand or get involved in crypto.
The passage of FIT21 is a victory for innovation and transparency in the crypto space. Onward and upward!
Stellar news! FIT21 passing the House shows that both sides can come together for the future of crypto. Onward!
FIT21 feels like it’s trying to do too much and will end up doing too little. What’s the real impact going to be?
Hats off to the House for passing FIT21! A major milestone for the digital asset ecosystem and a testament to bipartisan collaboration.