The U.S. House of Representatives approved H.R. 4763, titled the "Financial Innovation and Technology for the 21st Century Act" (FIT21), on May 22, 2024. This marks a significant step for the U.S. digital asset landscape, aiming to establish comprehensive regulations to foster innovation and ensure consumer protection. This article provides a concise summary of FIT21.

Introduced in July 2023, FIT21 received bipartisan support and sponsorship from key figures such as Chairman Glenn “GT” Thompson, Representatives French Hill, Dusty Johnson, Whip Tom Emmer, Warren Davidson, and Chairman Patrick McHenry. The Act seeks to establish clear federal guidelines for digital asset markets, balancing regulatory clarity with robust consumer protection to promote the growth of the digital asset ecosystem in the United States.

FIT21's framework comprises several titles, each addressing specific aspects of digital asset regulation and innovation:

Title I: Definitions; Rulemaking; Notice of Intent to Register

This section defines crucial terms under existing laws like the Securities Act of 1933, the Securities Exchange Act of 1934, and the Commodity Exchange Act. Definitions include terms like "digital asset," "blockchain," and "decentralized system," providing clarity on the Act's scope and application.

Section 105 mandates the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) to issue rules for further defining key terms and providing exemptions from redundant or conflicting regulations. This aims to ensure consistent regulatory standards and alleviate historical tensions between the SEC and CFTC regarding digital asset oversight.

Sections 106-107 outline the process for entities to submit notices of intent to register as digital commodity exchanges, brokers, dealers, and intermediaries, requiring detailed information on management, operations, and compliance.

Title II: Clarity for Assets Offered as Part of an Investment Contract

This title clarifies the classification and regulation of digital assets offered as part of an investment contract, distinguishing them from traditional securities.

Title III: Offers and Sales of Digital Assets

This section details regulatory requirements for offering and selling digital assets, including exemptions, disclosure mandates, and certification protocols. Enhanced disclosure requirements cover aspects like source code, transaction history, economics, development plans, and associated risk factors.

FIT21 represents a crucial step towards establishing a clear regulatory framework for digital assets in the United States, supporting innovation while safeguarding consumers' interests.