Quick Look:
- Despite initial opposition, the Biden administration will not veto the FIT21 crypto bill.
- The bill passed in the House with bipartisan support, including 71 Democrats.
- The White House signals readiness to work with Congress on balanced digital asset regulation.
The Biden administration announced today that it will not veto the highly contentious crypto market structure bill, H.R. 4763, also known as the Financial Innovation and Technology for the 21st Century Act (FIT21). This announcement comes despite the administration’s clear opposition to the bill. Thereby indicating a willingness to collaborate with Congress on creating a balanced regulatory framework for digital assets.
Bipartisan Support: 71 Democrats Vote for FIT21
On May 8, U.S. President Joe Biden threatened to veto the bill, reflecting the administration’s concerns about its potential impact on the regulatory landscape. However, recent developments have shown a shift in the legislative momentum.
Last week, eleven Democrats defied the anti-crypto stance of both Biden and Senator Elizabeth Warren. Aiding in the passage of the bill in the Senate and highlighting stronger bipartisan support. Today, the House of Representatives voted on FIT21, passing it with a vote of 279-136, including 71 Democrats who broke ranks to support the legislation.
White House Aims for Balanced Crypto Regulation
The White House expressed its readiness to work with Congress, emphasising the importance of a comprehensive and balanced regulatory framework for digital assets, building on existing authorities. This sentiment marks a notable shift from the administration’s previous hardline stance, potentially paving the way for more collaborative efforts in regulating the burgeoning crypto industry.
SEC Chair Gensler Criticizes FIT21 Bill
Despite this cooperative tone, key regulatory figures remain critical of the bill. SEC Chair Gary Gensler has voiced concerns, stating that the bill would undermine the regulator’s efforts to police both traditional capital markets and crypto markets effectively. The SEC has long maintained that the industry does not require additional legislation specific to crypto, arguing that existing laws suffice for regulatory oversight.
FIT21: Rules for CFTC and SEC on Digital Assets
The FIT21 bill mandates that the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) issue rules for regulating digital assets. It redefines the compliance framework for securities issuers. Thereby incorporating federal law and Supreme Court precedent and introducing a new definition for digital assets to determine their classification as securities or digital commodities. Additionally, the bill designates primary spot market regulators, either the SEC or CFTC, based on this classification.
Trump’s Crypto Strategy Against Biden
The political backdrop to this legislative development is complex and charged. The Republican Presidential nominee, Donald Trump, has announced his acceptance of crypto donations and plans to build a Bitcoin and crypto army to challenge Biden. This move underscores the increasing politicisation of cryptocurrency, influencing both the legislative and regulatory landscapes.
New Era for Decentralised Cryptocurrencies in U.S.
The bill also provides a pathway for sufficiently decentralised cryptocurrencies to be traded and used by Americans. This is a significant development given the SEC’s previous regulatory actions, which often resulted in the shutdown of crypto companies through legal means. This legislative shift could herald a new era of regulatory clarity and operational freedom for the crypto industry in the United States.
As the Biden administration and Congress navigate the intricate dynamics of regulating digital assets, the passage of FIT21 signals a critical juncture in the evolution of the cryptocurrency sector. This legislation potentially sets new precedents for managing and utilising digital assets.
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