The US House of Representatives made a significant move on Wednesday by approving a bill aimed at establishing a new regulatory framework for digital currencies. The legislation, known as the Financial Innovation and Technology for the 21st Century Act (FIT21), has garnered support from crypto enthusiasts but faced strong opposition from consumer groups concerned about investor protection.
FIT21, backed by Republicans, proposes to divide cryptocurrency regulation responsibilities between the Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC). It seeks to enhance the regulatory authority of the CFTC while diminishing the SEC’s oversight of digital assets. However, the bill faces an uphill battle in the Democratic-controlled Senate, with the SEC opposing it.
Supporters argue that current regulatory frameworks are outdated and ill-suited to govern the rapidly expanding crypto landscape. They believe FIT21 will bolster transparency and accountability in the crypto space by strengthening oversight of exchanges, brokers, and dealers.
Republican Patrick McHenry, chair of the House Financial Services Committee, criticized the ongoing jurisdictional dispute between the SEC and the CFTC, asserting that FIT21 would resolve this issue.
However, SEC Chairman Gary Gensler has expressed concerns that the bill could create regulatory gaps and undermine investor protection. He warned that it could exempt certain investment contracts from SEC oversight, potentially exposing investors to risks.
Gensler highlighted the risk of allowing crypto firms to self-certify investments under a new category of “digital commodities,” arguing that it would enable them to evade SEC scrutiny. He emphasized the importance of prioritizing investor protection over accommodating non-compliant business models in the crypto industry.
While the bill has garnered support from some crypto organizations and former President Donald Trump, who plans to accept crypto donations for his reelection campaign, it has faced opposition from consumer rights groups. These organizations argue that FIT21 undermines existing investor safeguards by circumventing established legal frameworks.
Congressman French Hill, chair of the subcommittee on digital assets, defended the bill, refuting claims that it would create a lax regulatory environment for crypto entities.
The Biden administration expressed willingness to collaborate with Congress on developing a comprehensive regulatory framework for digital assets but opposed FIT21 due to concerns about inadequate consumer and investor protections.
As the debate over crypto regulation intensifies, the fate of FIT21 remains uncertain, with stakeholders on both sides advocating for their respective interests.