CFTC-SEC friction does not overshadow the significance of FIT21 bill as a groundbreaking development in crypto.

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 received a two-to-one margin, with 71 Democrats and 208 Republicans voting in favor. This bipartisan support indicates a willingness from both parties to come together and asserts that Congress, rather than the Securities and Exchange Commission (SEC), should be responsible for making policy decisions. The passage of FIT21 also suggests a changing political landscape in Washington, D.C., where the crypto industry has become more organized and is now in a position to advocate for smart policy. The U.S. House of Representatives’ Financial Service Committee called the passage of FIT21 a “watershed moment for the U.S. digital asset ecosystem” in a press release. The legislation received larger bipartisan support than expected, with even Speaker Emerita Nancy Pelosi among the House Democrats supporting it. However, the passage of FIT21 coincided with the SEC’s change of heart on Ether, as the agency approved Ethereum spot-market exchange-traded funds. Additionally, the Congressional Review Act vote overturned Staff Accounting Bulletin 121, making it easier for highly regulated financial institutions and firms to act as custodians of digital assets. One potential friction point 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) depending on the decentralization of their underlying networks or projects. This dual-agency structure may cause confusion for market participants, and further exploration of the issue is expected in the Senate. While FIT21 has been seen as a way to limit the SEC’s authority over the crypto space, some argue that the legislation still gives the SEC significant power in U.S. crypto regulation. Regulating digital assets is a complex task, as tokens can change their form and function over time. Tokens could be subject to SEC jurisdiction or fall under CFTC jurisdiction depending on various factors. The SEC determines whether a system has become decentralized, which can be a subject of disagreement and interpretation. Despite the complexities, many believe that comprehensive crypto regulation is needed in the United States to keep up with other countries and provide access to various crypto products and services for U.S. citizens. FIT21 is seen as a framework rather than a finished blueprint for crypto supervision, and negotiations for specific details may occur in the future. The passage of FIT21 with strong Democratic support sends a message to the Biden administration that being “anti-crypto” is not a winning platform. Digital asset regulation is predicted to be a key electoral issue in 2024, attracting the votes of digital natives. While it may be challenging to get FIT21 through the Senate in an election year, there is a decent chance of it passing. President Biden’s willingness to work with Congress on a regulatory framework for digital assets indicates room for negotiation and a potential for a workable legislative solution. The political winds in Washington, D.C. seem to be shifting, although FIT21 still faces obstacles in the Senate.