The House voted 279 to 136 on Wednesday to pass the much heralded Financial Innovation and Technology for the 21st Century Act (FIT21), which has been cast as a major win for the industry considering this is the furthest any crypto-focused legislation has made it thus far in the U.S. The bill, which saw support from the vast majority of Republicans as well as 71 Democrats, will now head to the Senate – though likely not this year.
Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates. This is an excerpt from The Node newsletter, a daily roundup of the most pivotal crypto news on CoinDesk and beyond. You can subscribe to get the full newsletter here.
If passed, the bill would set up a regulatory framework for digital assets, helping to define when a certain token is a security or commodity. While the bill is largely thought to increase the Commodity Futures Trading Commission’s oversight of crypto, the Securities and Exchange Commission would likely continue to play a significant role in regulating the industry.
While many have said the bill is something of a turning point for crypto in the U.S., not everyone thinks it will pan out as expected.
“It does not even shift agencies; SEC would still have huge power. It provides for a dual regulatory regime, split between SEC and CFTC. It does this by giving the CFTC authority it never had–regulatory authority over a spot commodities market,” crypto legal expert Gabriel Shapiro said on X. “Man we have been psyopped so bad on this FIT21 thing.”
“There has never before been a spot commodities market that is *regulated*…we are just handing this authority over wholesale to the CFTC and hoping they are not insane fascists like Gary (but he used to be head of CFTC lol),” he added.
In other words, the bill is essentially a way for the government to sanction activities that the industry has already been doing without permission, and potentially sets up an agency to interfere with what are supposedly free and open markets.
It was a point echoed by Stephen Palley, another leading legal voice in crypto, who said he does “not like [it] at all.”
“It needlessly creates more jurisdiction for CFTC over spot and a walled garden for incumbents, among other things. But you dipshits kept asking for new laws,” Palley, a partner at Brown Rudnick, added.
Somewhat ironically, Shapiro and Palley’s criticisms seem to line up with Maxine Waters (D-CA), the ranking Democrat on the House Financial Services Committee, who said it was the one of the worst bills she’s ever seen. In addition to potentially stretching the resources of the CFTC, which only has around 700 employees compared to the SEC’s 4,500, it may also undermine other legislative efforts – like the stablecoin bill Waters worked on alongside House Financial Services Chair Patrick McHenry (R-NC).
“Let me let you [in] on a secret that the big crypto doesn’t want you to know even under this bill,” Waters said. “The CFTC does not get enough authority to regulate crypto in this bill.”
Likewise, SEC Chair Gary Gensler has said the effort would create more confusion and regulatory gaps than it closes. Gensler has said for years that the law is clear, and that there should not be bespoke rules for crypto.
Regardless, many in the crypto industry have seen the bipartisan vote as a symbolic vote for crypto itself, perhaps a harbinger of a better future. The move comes just days after the House and Senate voted to repeal a controversial SEC accounting rule, which itself was seen as a sign that sanity will ultimately prevail.
If there is a silver lining, many experts think FIT21 is likely to die on the vine. TD Cowen, for instance, said a few weeks ago the bill stood “no chance of becoming law in this Congress.” So maybe this is one psyop worth celebrating?
