House lawmakers on Wednesday passed a bill that aims to establish regulatory clarity for digital assets, marking a historic move forward for cryptocurrency legislation in the U.S.
The bill, known as the Financial Innovation and Technology for the 21st Century Act, or FIT 21 Act, advanced out of both the House Financial Services Committee and House Agriculture Committee back in July, following the bill's introduction by senior Republican members of both committees.
Rep. French Hill, R-Ark., chair of the House Financial Services Subcommittee on Digital Assets, Financial Technology and Inclusion, sponsored the bill alongside fellow committee member and House Majority Whip Tom Emmer, R-Minn.; House Agriculture Committee Chair Glenn "GT" Thompson, R-Pa.; and Rep. Dusty Johnson, R-S.D., who chairs House Agriculture's subcommittee on digital assets.
The House voted to pass the bill in a 279-136 vote, with nearly all Republicans and 71 Democrats voting yes.
The bill gives the Commodity Futures Trading Commission new oversight of the digital commodities market while also designating the Securities and Exchange Commission as the regulator for the digital securities market. The legislation calls on both agencies to propose joint rule-makings on digital assets and allows digital asset intermediaries to dually register with the SEC and CFTC.
Lawmakers behind the legislation say it’s needed to address an absence of clarity for digital asset firms in the U.S.
“Absent clear rules, we will continue to see the SEC pursue a ‘regulation by enforcement’ agenda that leaves market participants fearing that they’ll be subject to litigation at a moment’s notice if they continue to operate in the U.S.,” Hill said Tuesday before the House Rules Committee.
However, SEC Chair Gary Gensler expressed disapproval of the bill, warning in a statement Wednesday ahead of the vote that it “would create new regulatory gaps and undermine decades of precedent regarding the oversight of investment contracts, putting investors and capital markets at immeasurable risk.”
Gensler is a longtime critic of the crypto industry and has repeatedly said it’s rife with noncompliance.
The chair of the House Financial Services Committee, Patrick McHenry, R-N.C., pushed back on Gensler’s statement Wednesday at the Investment Company Institute’s 2024 Leadership Summit in Washington. He instead said it’s “the Gensler regime that has made things less certain [and] more difficult for regulated [entities] to play substantial roles in this space and provide consumer protection.”
Ahead of the vote, many digital asset organizations rallied their support behind the legislation.
On March 16, nearly 60 organizations — including the Crypto Council for Innovation, Consumer Technology Association and several crypto firms themselves, such as Coinbase and Gemini — sent a letter to House Speaker Mike Johnson, R-La., and House Minority Leader Hakeem Jeffries, D-N.Y., expressing their support for the bill.
“We recognize that FIT 21 will introduce new compliance challenges for digital assets companies, but regulatory clarity is indisputably more responsible, safer for consumers and preferable to the status quo,” the organizations wrote in their letter.
Johnson and Jeffries received a similar letter of support Monday from the Blockchain Association, whose members include Grayscale Investments, Kraken and Ripple. Their letter also underscored the need for legislation to bring “regulatory clarity” to the industry.
The bill would need to pass the Senate before it could be sent to President Biden’s desk, though its prospects of becoming law are unclear.
Brian Gardner, chief Washington policy strategist at Stifel Financial, said in a statement that the bill is “unlikely to pass the Senate and become law,” but its passage represents an important step forward in eventually achieving cryptocurrency legislation.
A statement Wednesday from the White House indicated that Biden opposes the bill because it “lacks sufficient protections for consumers and investors who engage in certain digital asset transactions,” but the statement did not threaten a presidential veto