The US House of Representatives has taken a bold step forward in the world of cryptocurrency by passing the Financial Innovation and Technology for the 21st Century Act (FIT21). This bipartisan legislation, approved by a vote of 279-136, aims to establish a new legal framework for digital currencies, despite warnings from the Securities and Exchange Commission (SEC) about potential financial risks.

Shifting Power to the CFTC

The FIT21 Act would grant expanded liberties to crypto operators in the US and transfer greater regulatory oversight of digital assets to the Commodity Futures Trading Commission (CFTC). By categorizing most digital assets as commodities instead of securities, the bill would shift regulatory oversight away from the SEC, potentially putting President Joe Biden in a difficult position as he must decide whether to go against his own SEC chairman and refuse a veto.

Implications for Innovation and Competitiveness

House Majority Whip Tom Emmer believes that the passage of the Act will pave the way for flourishing American digital asset innovation, providing entrepreneurs with the clarity and assurance they need to build in the United States while ensuring that the next iteration of the web emulates American values.

Opposition from the SEC and White House

Despite the House's approval, the FIT21 bill still faces hurdles. The White House has issued a statement expressing concerns that the bill doesn't do enough to protect consumers involved in certain cryptocurrency transactions, although it has refrained from completely vetoing the legislation.

SEC Chair Gary Gensler has also voiced criticism against FIT21, arguing that the bill would create new regulatory gaps, undermine decades of precedent regarding the oversight of investment contracts, and potentially endanger investors and capital markets. Gensler believes that the crypto industry's record of failures, frauds, and bankruptcies is not due to a lack of rules or unclear regulations, but rather because many players in the crypto industry don't play by the rules.

The Road Ahead

The passage of the FIT21 Act in the House is just the first step in the legislative process. The bill still needs to be approved by the Senate and signed by the President to become law. As the crypto industry and regulators continue to navigate this uncharted territory, the outcome of the FIT21 bill will have significant implications for the future of digital currencies in the United States.