President Joe Biden and SEC Chair Gary Gensler have issued statements ahead of the House of Representatives' imminent vote on the Financial Innovation and Technology for the 21st Century (FIT21) Act, a critical piece of legislation concerning cryptocurrency regulation. The Biden administration, in a notice dated May 22, expressed its opposition to H.R. 4763, the FIT21 Act, arguing that it lacks adequate safeguards for consumers and investors involved in certain digital asset transactions. Shortly after, Chair Gensler released a statement warning that FIT21 could introduce new regulatory loopholes and jeopardize the stability of U.S. capital markets if enacted.

Gensler referenced a Chainalysis report from January to bolster his assertion that crypto firms' widespread noncompliance has led to fraudulent activities, bankruptcies, and misconduct. However, despite his concerns, the analytics platform reported a significant decline in revenue from illicit crypto-related activities in 2023. According to Gensler, the failures and frauds within the crypto industry stem not from a lack of regulations but from the deliberate disregard for existing rules by many industry players. He emphasized the need to prioritize investor protection over accommodating noncompliant business models.

The FIT21 Act, slated for a vote in the House on May 22, aims to clarify the regulatory framework for digital assets under the jurisdiction of the SEC and the Commodity Futures Trading Commission (CFTC). With regulatory ambiguity cited as a reason for some crypto firms leaving the U.S. or facing enforcement actions by the SEC, industry leaders and lawmakers advocate for a clearer regulatory environment. The White House expressed its willingness to collaborate with Congress on crafting alternative legislation to establish a robust regulatory framework for cryptocurrencies. Notably, President Biden indicated that he would not veto the FIT21 bill if it were to pass, unlike his stance on H.J.Res. 109, a joint resolution concerning an SEC accounting rule on banks handling crypto.

The FIT21 bill faces a vote in the House where Republican lawmakers hold a slim majority. However, with 21 Democrats previously voting in favor of H.J.Res. 109, the outcome remains uncertain. Representatives Wiley Nickel and French Hill, representing Democrat and Republican factions respectively, have publicly announced their intentions to vote in favor of FIT21.