U.S. House of Representatives Passes Landmark Crypto Bill

On Wednesday, the crypto industry achieved its largest-ever U.S. policy victory as the House passed a comprehensive bill to regulate digital asset markets. The vote, which saw Democrats crossing party lines, ended with 279 in favor and 136 against. The crypto market-structure bill represents the industry’s most notable legislative success in Congress to date.

Financial Innovation

The Financial Innovation and Technology for the 21st Century Act (FIT21) is the first major crypto bill to clear one chamber of Congress. The bill now heads to the U.S. Senate, where its future is uncertain due to the absence of a counterpart bill and unclear support. The Senate committees have not yet undertaken significant work on crypto regulation. Despite the House’s strong victory, establishing comprehensive oversight for the crypto industry in the U.S. is still a work in progress.

“We need rules of the road,” said Rep. Josh Gottheimer (D-N.J.), a Democrat who supported the bill despite opposition from the White House and the ranking Democrat on the House Financial Services Committee, Rep. Maxine Waters (D-Calif.). He described the bill as “well-reasoned, thoughtful, bipartisan legislation” and urged collaboration to make it law.

In total, 71 Democrats and 208 Republicans voted for the bill, while 3 Republicans and 133 Democrats opposed it.

Jake Chervinsky, a lawyer who supports crypto, posted on X, “That is a *huge* number of elected Democrats voting “no confidence” in the current SEC, and sending a message to the Biden administration that “anti-crypto” is a losing platform this year.”

The fact that so many democrats supported the bill suggests that the democrats are unwilling to alienate crypto-loving Americans in the lead up to the election cycle.

Biden and Gensler Opposed

President Joe Biden opposed the bill but did not threaten a veto, unlike a recent effort by Congress to overturn an SEC policy on crypto accounting. SEC Chair Gary Gensler also criticized the legislation, arguing it was unnecessary and jeopardized existing securities regulations.

Gensler wrote, “The Financial Innovation and Technology for the 21st Century Act (“FIT 21”) would create new regulatory gaps and undermine decades of precedent regarding the oversight of investment contracts, putting investors and capital markets at immeasurable risk.

First, the bill would remove investment contracts that are recorded on a blockchain from the statutory definition of securities and the time-tested protections of much of the federal securities laws.

Further, by removing this set of investment contracts from the statutory list of securities, the bill implies what courts have repeatedly ruled – but what crypto market participants have attempted to deny – that many crypto assets are being offered and sold as securities under existing law.”

The legislation, mainly driven by House Republicans, aims to regulate the U.S. crypto markets by setting consumer protections, appointing the Commodity Futures Trading Commission (CFTC) as the primary regulator of digital assets, and clarifying the definitions of crypto tokens as securities or commodities.

Rep. Maxine Waters argued that the bill would allow crypto businesses that have evaded securities laws to escape accountability. “They have already made billions of dollars unlawfully issuing or facilitating the buying and selling of crypto securities,” she said. “And Republicans are now proposing to reward these illegal activities by making them legal.”

Before the vote, the House debated several amendments to the bill, including those by Reps. Greg Casar (D-Texas), Brittany Pettersen (D-Colo.), Ralph Norman (R-S.C.), and Scott Perry (R-Pa.). While Casar’s amendment to change a crowdfunding exemption from $75 million to $5 million was defeated, the rest were adopted.

The Bill

FIT21 will protect consumers by strengthening transparency and accountability with market participants:

• Digital asset developers will be required to provide accurate, relevant disclosures, including information relating to the digital asset project’s operation, ownership, and structure; and
• Digital asset customer-serving institutions, like exchanges, brokers, and dealers will be required to:
  • Provide appropriate disclosures to customers;
  • Segregate customer funds from their own; and
  • Reduce conflicts of interest through registration, disclosure, and operational requirements.

FIT21 will strengthen the market by protecting digital asset projects:

• Digital asset developers will have a pathway to raise funds; and
• Participants will have a clear process to determine which digital asset transactions are subject to the SEC’s jurisdiction and the CFTC’s jurisdiction.

FIT21 will protect digital asset customer-serving institutions by:

• Establishing clear lines between the SEC and CFTC; and
• Creating comprehensive registration regimes to permit them to lawfully serve customers in digital asset markets.

Trump Embraces Crypto

Meanwhile, President Trump’s campaign began accepting crypto donations this week. Its website says, “Demonstrating President Trump’s success as a champion of American freedom and innovation, we proudly offer you a chance to contribute to the campaign with cryptocurrency. Saving our nation from Biden’s failures requires your support. As Biden piles regulations and red tape on all of us, President Trump stands ready to embrace new technologies that will Make America Great Again.” The website allows donors to donate amounts of $20.24, $45, $47, $2024, or $4547.

Source: Trump