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The US House is preparing to vote on the first stand-alone cryptocurrency market structure bill
The US House of Representatives is poised to vote in favor of a cryptocurrency market structure bill for the first time, in a symbolic effort to fundamentally reshape the country’s digital asset regulatory landscape.
The Financial Innovation and Technology for the 21st Century Act, sponsored by members of the House Financial Services and House Agriculture committees, will begin seeing votes Wednesday afternoon, where it is expected to pass with a bipartisan majority.
The bill, called FIT21, would grant the Commodity Futures Trading Commission (CFTC) greater spot market authority over digital assets considered commodities, while creating new jurisdictional lines for the Securities and Exchange Commission (SEC). Crypto firms and issuers of digital assets would have a framework for determining whether and how their assets are securities under the terms defined by the bill, which in turn would allow them to know who their lead regulator might be.
Rep. Patrick McHenry (R-N.C.), who chairs the Financial Services Committee, told reporters Tuesday that he hopes for “a substantive vote” in favor of the legislation to demonstrate that there is real momentum for digital assets legislation , one week later. after the Senate voted in favor of a House resolution that overturned the SEC’s accounting guidelines.
The bill is expected to pass, with a handful of Democrats joining the majority of Republicans in voting for the bill. The bill’s path through the Senate is less clear, and the White House said Wednesday that it opposes the legislation, even as President Joe Biden he did not threaten a veto.
The bill has been the subject of numerous discussions in recent days.
Rep. Jim Himes (D-Conn.), one of the at least nine Democratic lawmakers who said they would support the bill said, “Look[ed] I look forward to working with my colleagues on the Financial Services Committee on our continued oversight of this issue.”
“FIT21 represents a major step forward in the regulation of the cryptocurrency industry and a significant improvement over the status quo,” he said in a statement.
Rep. Ro Khanna (D-California) announced will vote in favor of the bill shortly before Wednesday’s vote, saying “we need blockchain innovation here in America.”
Rep. French Hill (R-Ark.) told reporters Tuesday that the bill creates a “5-step test for whether something is a decentralized blockchain or not” and includes a roadmap the regulator can use.
In comments to the House Rules Committee, he said the lawmakers who developed the bill worked with regulators – including the SEC – for more than a year, incorporating their feedback into the legislation.
“We have included provisions to mitigate conflicts of interest. We impose capital and other necessary requirements on intermediaries. And we impose higher standards for custody,” he said.
There is also an interim process, under which companies must submit a “notice of intent to register” to agencies, he said.
Opposition to the bill, however, begins within the House Financial Services Committee itself.
Rep. Maxine Waters (D-California), the committee’s ranking member, called the bill “not fit for purpose” and told the House Rules Committee on Tuesday that “it is perhaps the worst deregulation proposal and more harmful than I have ever seen.” seen for a long time”, comparing it to the Commodity Futures Modernization Act. The CFMA, Waters charged, deregulated certain derivative products that later “blew up our economy when… AIG collapsed.”
FIT21 does not give the CFTC more authority to crack down on fraud or other crimes, despite placing the agency in charge of overseeing digital commodities, he said. The bill also eliminates disclosure requirements after 180 days, meaning the regulator cannot force companies it is supposed to regulate to provide audited financial statements beyond that deadline.
“What is even more problematic is the bill’s definition of listing ‘contractual investment assets,’” he said. “Securities that meet this definition would be moved into a regulatory vacuum, with no primary regulator and virtually no laws and regulations to speak of. Importantly, the investment contract’s definition of assets is not limited to cryptocurrencies, and it would be quite easy for both crypto and traditional securities must be formatted to meet this definition.”
A group of unions, consumer protection organizations, academics and others were sent a public letter to House Speaker Michael Johnson (R-La.) and Minority Leader Hakeem Jeffries (DN.Y.), asking them to vote against the bill and presenting a list of concerns similar to Gensler’s.
The letter took aim at the industry more broadly, stating that cryptocurrencies “still struggle to demonstrate viable use cases outside of speculative investing” and referencing various ongoing bankruptcies and civil and criminal litigation.
“The sector has recovered superficially this year, in part due to the controversial approval of BTC spot ETPs by the Securities Exchange Commission,” the letter reads. “However, the scams, hacks, thefts, instability, reckless promotional activities and regulatory evasion present during the last cryptocurrency bull market remain endemic to the industry today.”
The letter was signed by organizations including the AFL-CIO, Americans for Financial Reform, Revolving Door Project, National Consumer Law Center, and more than 30 other people and 10 individuals.
Echoing Gensler, the groups said they were concerned that the bill would weaken existing securities laws to the point that even non-crypto companies could “evade stricter oversight” by tying themselves to a decentralized network (or at least claiming to be linked to a decentralized network). net). While the bill gives more authority to the CFTC, the letter says that authority “is vague,” so much so that it could weaken other agencies like the Consumer Financial Protection Bureau.
“All in all, we believe that this bill, as written, introduces a political ‘cure’ that would be far worse than the disease and would create significant harm within and well beyond the cryptocurrency industry,” the letter reads.
Supporters of the bill argue that the legislation is needed to support companies’ efforts to “build a better financial services system and a better internet.”
“Since the birth of the Bitcoin network in 2009, the blockchain and digital asset industry has existed without targeted market regulation,” a letter submitted by the Blockchain Association, a lobbying group, he said. “The absence of clear rules creates confusion in the marketplace for companies and leaves users and consumers without protection.”
The letter, signed by groups including stablecoin issuer Circle, Ethereum incubator ConsenSys, venture capital firm Digital Currency Group, exchanges such as Kraken and 50 other industry companies, goes on to argue that the “lack of clarity” risks leaving the United States behind. in the “global technology race”.
SEC Chairman Gary Gensler published it a declaration he opposed the legislation on Wednesday. In it, he raised the specter of various cryptocurrency crashes and frauds, suggesting that the bill could allow even traditional pump and dumpers or penny stock dealers to escape oversight by branding themselves as users of decentralized networks.
“We should make the political choice to protect the investing public instead of facilitating the business models of non-compliant companies,” he said.