US House passes FIT21 crypto bill: The future implications explained

A bill that aims to clarify the roles of the United States securities and commodities regulator in monitoring cryptocurrency is making its way to the Senate before reaching President Joe Biden’s desk. The Financial Innovation and Technology for the 21st Century Act (FIT21), also known as H.R. 4763, led by the Republican Party, passed a vote in the U.S. House of Representatives on May 22. The bill received support from 208 Republicans and 71 Democratic Party representatives, while 136 representatives voted against it. However, its future in the Senate remains uncertain, especially with Senator Elizabeth Warren, one of the country’s biggest crypto critics. Despite the Senate passing a resolution on May 16 to eliminate a rule restricting banks and crypto firms from conducting business, there is no companion bill for FIT21. The bill’s journey through the Senate could take months, as there is no specific timeframe for senators to act on it. If it does proceed, the bill would likely be referred to a committee for further review, hearings, and amendments. To pass, a majority of 51 senators must vote in favor of it. The content of FIT21 may undergo changes as members from the House and Senate meet to reconcile any differences in their versions of the bill. Once this process is complete, the bill will return to Congress for final approval. Once received, President Biden will have 10 days to either sign or veto FIT21. However, the administration announced on May 22 that it opposed the bill, but it did not state whether President Biden would veto it. Even if he does veto FIT21, the House and Senate can override his decision by passing the bill with a two-thirds majority vote in both chambers. The cryptocurrency industry has celebrated the passage of FIT21 in the House of Representatives. However, U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler publicly expressed opposition to the bill, stating that it introduces “new regulatory gaps” and poses a risk to the stability of capital markets. Despite this opposition, the bill’s success in the House is seen as an early victory for the crypto industry. Coinbase CEO Brian Armstrong hailed the passage of the bill, along with the support of 71 Democrats, as a “total victory” and a win for clear regulations in the crypto space. However, legal experts like Jake Chervinsky caution that FIT21 still grants significant power to the SEC. On the other hand, Gabriel Shapiro, a lawyer focused on cryptocurrency, believes that FIT21 would give the SEC increased authority. FIT21 predominantly shifts control of crypto to the Commodity Futures Trading Commission (CFTC), which is perceived as a more lenient regulator compared to the SEC. However, the SEC would retain regulatory power over cryptocurrencies that are not deemed sufficiently decentralized, while FIT21 would provide a framework for selling cryptocurrencies considered securities as commodities. The proposed regulations on crypto in the United States are largely driven by lawmakers’ fears and doubts surrounding the industry.