US House of Representatives passes market structure bill to regulate cryptocurrency industry

The U.S. House of Representatives has passed a cryptocurrency market structure bill aimed at regulating the industry as a whole, marking the first time a comprehensive cryptocurrency bill has been voted on by the full House.

The House voted 279 to 136 Wednesday to pass the Republican-led Financial Innovation and Technology for the 21st Century Act (FIT21). 71 Democratic lawmakers voted to support the bill, including former House Speaker Nancy Pelosi (Calif.).

“FIT21 is the first step toward establishing a regulatory framework for digital assets, and we must work with the Senate and the Administration to improve it,” Pelosi said in a statement after the vote. “While we build the foundation for responsible innovation, we must take additional steps to strengthen guardrails for consumers, investors, and taxpayers.”

FIT21 would give the Commodity Futures Trading Commission more powers and funding to oversee cryptocurrency spot markets and “digital goods,” particularly Bitcoin. The bill also creates a process to allow secondary market trading of digital goods “initially offered as part of an investment contract.” Stablecoin and anti-money laundering provisions were also included in the bill. Although it is unlikely that FIT21 will be brought up in the Senate this year, the bill could set the stage for the next Congress in January.

“We’re driving like hell to get everything we can out of this Congress,” House Financial Services Chairman Patrick McHenry, who plans to retire at the end of his term in January 2025, told reporters at a briefing Tuesday, citing bipartisan support. “I will go,” he said. .

“My time as Speaker and my time in Congress are coming to an end, but the policy is not over,” McHenry said.

Ron Hammond, director of government relations at the Blockchain Association, said Congress’s views on cryptocurrencies are changing.

“Over the past 48 hours, we’ve seen the cryptocurrency grassroots and political forces bring about a seismic shift in the perception of the industry here in DC,” Hammond said in a statement to The Block. “This view of the industry appears likely to not only change industry opinion in Congress ahead of the FIT21 vote, but also potentially undo the regulatory hurdles the SEC Chairman has sought to build his legacy on.”

FIT21 is “a huge turning point,” Hammond added.

“The connection between crypto voters and the upcoming election is undeniable, and it appears the Biden administration is finally starting to realize the potential consequences of maintaining the status quo,” Hammond said.

A vote on FIT21 will take place after the Senate and House of Representatives. pass action to withdraw A stock exchange staff accounting bulletin that sets specific accounting standards for companies that store cryptocurrency. The resolution has some Democratic support, including from Senate Majority Leader Chuck Schumer. But the White House said President Joe Biden would veto it. On Wednesday, the White House said: Oppose FIT21 is “eager to work with Congress” on a regulatory framework for digital assets.

criticism of the bill

Rep. Maxine Waters, D-Calif., of the House Financial Services Committee, told the House Rules Committee on Tuesday that FIT21 was one of the worst bills she had ever seen.

FIT21 would increase the CFTC’s resources and weaken the agency’s industry enforcement, Waters said. The SEC has 4,500 employees, according to its website, while the CFTC only has about 700 employees, according to fiscal year 2024 budget documents.

“I’m going to tell you a secret the big cryptos don’t want you to know, even under this bill,” Waters said. “The CFTC does not gain sufficient authority to regulate cryptocurrencies in this bill.”

SEC Chairman Gary Gensler criticize FIT21 said it would create new gaps in regulation and scrap the Howey test. The 1946 U.S. Supreme Court case is often cited in cases involving cryptocurrencies, as the SEC seeks to determine whether the assets qualify as investment contracts and are therefore securities.

“The cryptocurrency industry’s record of failures, fraud, and bankruptcies is not because there are no rules or the rules are unclear. It’s because many players in the cryptocurrency industry don’t follow the rules,” Gensler said in his speech. wednesday. “We must make policy choices that protect the investing public rather than promoting the business models of non-compliant companies.”

What are your future plans?

There is no companion bill to FIT21 in the Senate, and senior members of the Democratic-controlled Senate have not shown interest in or opposed the bill in the past.

investment banking TD Cowen He said earlier this month that the bill was “unlikely to become law in this Congress,” but noted that it could shed light on how Democrats and Republicans view important issues such as anti-money laundering and investor protection.

Sens. Kirsten Gillibrand (D-N.Y.) and Cynthia Lummis (R-Wyo.) released There is a comprehensive bill to regulate cryptocurrencies in June 2022 called the Responsible Financial Innovation Act, but it is not a companion bill to FIT 21 and has not yet gained traction on the Hill.

Meanwhile, lawmakers have advanced stablecoin legislation in the House and Senate, led by Gillibrand, Lummis, McHenry, and Waters. At home disagreement There is an ongoing debate about who should be the primary regulator of stablecoins.

“Mr. McHenry and I have been working on a stablecoin bill for two years and I think we were able to get one, but I understand there was some resistance on the other side of the aisle,” Waters said during a House Rules Committee hearing. On Tuesday. “I think we should have pursued that. I think we could have achieved it. But instead, here we came up with a very different market structure.”

Updated May 22 at 10:10 PM UTC to include details about Pelosi.

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