Crypto news update:
The U.S. House of Representatives approved a new bipartisan pro-crypto bill called the Financial Innovation and Technology for the 21st Century Act (FIT21). The bill faced criticism from SEC Chair Gary Gensler and the Biden administration, who cited the volatility of crypto assets and the bill’s lack of investor protections.
Despite this, Republicans strongly supported the measure, with all but three House Republicans voting in favor. Additionally, about a third of House Democrats also backed the bill, resulting in a total of 208 Republicans and 71 Democrats voting for it.
The bill designates the Commodity Futures Trading Commission (CFTC) as the primary regulator for cryptocurrency. Controversially, it allows cryptocurrency issuers to self-certify, enabling them to bypass traditional processes and compliance requirements.
Gensler warned, “The self-certification risks investor protection not just in the crypto space; it could undermine the broader $100 trillion capital markets by providing a path for those trying to escape robust disclosures, prohibitions preventing the loss and theft of customer funds, enforcement by the SEC, and private rights of action for investors in the federal courts.” He added that FIT21 would create regulatory gaps and undermine decades of oversight precedent, posing significant risks to investors and capital markets.
Gensler has previously criticized cryptocurrency legislation, describing a 2022 bill promoted by Sam Bankman-Fried as “too light-touch.” His reluctance towards FIT21 may stem from its reduction of the SEC’s oversight of cryptocurrencies, shifting much of that authority to the CFTC. Many cryptocurrency firms prefer the CFTC due to concerns that SEC jurisdiction could stifle innovation.
While the SEC has taken stringent enforcement actions against the cryptocurrency sector in recent years, drawing criticism from the industry, the CFTC has also targeted major players like Binance and smaller exchanges like KuCoin for allegedly operating illegal derivatives exchanges. Thus, regulation will likely continue to involve significant enforcement against bad actors.
After passing the House, the FIT21 bill now moves to the Senate, where it is expected to face challenges. Although its passage this legislative session is unlikely, the advancement of a bipartisan cryptocurrency measure is seen as a positive development.
