Key Points
- By the end of May, the House of Representatives will vote on an important bill for regulating the crypto industry.
- The bill is HR 4763, the Financial Innovation and Technology for the 21st Century Act.
The House of Representatives will reportedly vote on an important bill for the crypto industry (HR 4763) called the Financial Innovation and Technology for the 21st Century Act.
FIT21 could make regulating crypto in the US clearer for everyone who is working in the industry.
Here’s what the bill should bring new if it passes:
- It will offer blockchain projects a pathway to safely and effectively launch in the US.
- It will clarify the line between the SEC and CFTC on crypto regulations, and it will decide whether digital assets are securities or commodities.
- It will ensure correct oversight of crypto exchanges while protecting American consumers by implementing crypto trading rules.
Establishing a new regulatory framework for US crypto markets
The FIT21 bill/HR 4763 essentially establishes a regulatory framework for US crypto markets to address the unique structure of crypto provide clear and robust consumer protections and clarify which cryptos are regulated by the CFTC (Commodity Futures Trading Commission) and which are regulated by the SEC (Securities and Exchange Commission).
The main reason for which this is important is the difference between definitions of commodities/securities and the regulation consequences.
The CFTC would regulate a digital asset as a commodity if the blockchain or digital ledger on which it runs is functional and decentralized.
The SEC would regulate a digital asset as a security if its associated blockchain is functional but not also decentralized.
Decentralization is defined by the bill as it follows: “if, among other requirements, no person has unilateral authority to control the blockchain or its usage, and no issuer or affiliated person has control of 20% or more of the digital asset or the voting power of the digital asset.”
Other consumer protection requirements
The new bill would also establish other consumer protection requirements such as:
- segregation of customer funds
- lock-up periods for token insiders
- limitations on annual sales volumes
- disclosure requirements
All these are similar to the protections regulators implemented following the Great Depression, after the excesses of the 1920s and the stock market crash of 1929. Back then, following the implementation of regulations, the US saw an unprecedented era of growth and innovation in the markets and the economy in general.
The FIT21 bill is the result of a joint effort by the House Committee on Financial Services (overseeing the SEC) and the House Committee on Agriculture (overseeing the CFTC) with input from the industry.
The vote on the bill will take place in the next two weeks and it will involve a referendum on crypto in the US. For the bill to pass, it’s necessary to have strong bipartisan support. After that, it has to be passed by the Senate and signed by the US President in order to become law.
The vote on this bill is crucial for the US to maintain leadership in financial innovation.
