US House to vote on FIT21 Act, aiming to clarify US crypto regulations

The U.S. House of Representatives is set to vote on the Financial Innovation and Technology for the 21st Century Act (HR 4763), commonly referred to as FIT21, by the end of this month.

According to a letter from a16z, this bill seeks to clarify cryptocurrency regulations by defining the responsibilities of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), thereby creating a clear regulatory framework for digital assets.

Despite some industry concerns about the strict requirements for decentralization and potential jurisdictional overlaps, the bill is seen as a vital move toward regulatory clarity. 

This bipartisan legislation has received backing from both the House Committee on Financial Services and the House Committee on Agriculture. 

FIT21 aims to specify which digital assets fall under the SEC regulation as securities and which under CFTC regulation as commodities. The bill seeks to classify an asset as a security if its underlying blockchain has not attained sufficient decentralization. 

Besides, the bill proposes consumer protection measures for crypto exchanges, such as separating customer funds, lock-up periods for token insiders, and disclosure requirements.

Amid the ongoing uncertainty on regulation in the U.S., the SEC has assumed the position of primary regulator of the crypto industry, carrying out multiple enforcement actions against crypto-related firms. Some of these actions have been demonstrated in its lawsuits against Coinbase and Binance exchanges.

Following the lawsuit on Coinbase, the exchange contended that the SEC’s classification of cryptocurrencies listed on its platform as securities constitutes an overreach, as the company makes its final effort to dismiss the lawsuit.

The CEO of Binance also stated that its lawsuit against the SEC led to banking institutions withdrawing support from the exchange. He claimed it led to significant operational disruptions.

Ripple has also continued to battle the SEC, with its lawsuits now in the remedies phase. The broader crypto community has bemoaned these enforcement actions, advocating for clearer rules. On May 10, the House Financial Services Committee announced its plan to review the FIT21 Act. 

House Financial Services Committee Chairman Patrick McHenry highlighted the significance of the FIT21 Act in resolving persistent regulatory ambiguities.

“For far too long, the U.S. digital asset ecosystem has been plagued by regulatory uncertainty that has stifled innovation and left consumers unprotected.” 

U.S. Rep. Patrick McHenry said.

Previously, crypto.news reported that CFTC Chairman Rostin Behnam had urged Congress to provide a clearer ground for crypto regulations, highlighting the need to address regulatory gaps.