Fit21 Encryption Bill of the Republican Party in the United States Approved for Full Deliberation in the House of Representatives

Fit21 Encryption Bill Approved for Full Deliberation in US House

On the afternoon of July 27th, New York time, on the second day of the passage of the “Financial Innovation and Technology for the 21st Century Act” (Fit21) by the House Financial Services Committee, members of the House Agriculture Committee gave the green light to the bill. The legislation will soon be sent to the full House for a vote.

Glenn Thompson, Chairman of the Pennsylvania Agriculture Committee, said at Thursday’s hearing, “This legislation marks the efforts of the House Agriculture Committee to create a much-needed regulatory framework for digital assets, protecting consumers and investors, while promoting the United States’ leadership in finance and technology.”

New legislation clarifies regulatory framework

This 212-page bill was jointly drafted by Republican members of the Agriculture Committee and the Financial Services Committee, with the aim of addressing regulatory gaps by creating a framework for “specific risks associated with different digital asset activities”. French Hill, Chairman of the Subcommittee on Digital Assets, Financial Technology, and Inclusive Finance, introduced the legislation last week.

The bill grants the Commodity Futures Trading Commission (CFTC) jurisdiction over digital commodities, clarifies the jurisdiction of the Securities and Exchange Commission (SEC), and establishes a process for the sale of digital assets that were originally considered securities as commodities.

The bill also specifies the conditions under which digital assets are considered commodities, with decentralization being a major requirement, and digital asset commodities can be sold on digital asset trading systems registered with the SEC. Market participants must comply with new, more comprehensive disclosure requirements and can register with both agencies.

Disclosure requirements include providing the source code for the project, and the legislation provides clear guidelines for the classification of digital assets, emphasizing that the existence of investment contracts does not automatically classify tokens as securities.

According to the bill summary released by the co-sponsors, approximately 70% of cryptocurrencies are more appropriately classified as commodities rather than securities. In order to act as a digital asset intermediary, the institution must conduct inspections of companies seeking to register with the SEC as broker-dealers or alternative trading systems.

These institutions also need to cooperate with foreign regulatory authorities to establish consistent regulatory standards. The Government Accountability Office needs to complete a study on non-fungible tokens (NFTs) and how they integrate into traditional markets.

Obstruction from the Democratic Party

On the day before the bill was introduced, Representatives French Hill and Dusty Johnson wrote a letter to SEC Chairman Gary Gensler criticizing the agency’s so-called “coercive regulation” of the crypto industry.

Because not all members of the Agriculture Committee support the bill, Democratic members in particular have expressed concern about the registration process for cryptocurrency broker-dealers.

Illinois Representative Jonathan Jackson proposed an amendment to remove the amendment in the bill that allows companies that have submitted “notice of intent to register” to be exempt from certain enforcement actions by the SEC. Jackson said, “Allowing ‘intent to register’ before these regulations are completed is absolutely unfair to our voters and retail investors, and this industry needs comprehensive regulation and supervision.”

Glenn Thompson countered, “Intentional notice” allows companies that meet the requirements for customer fund processing, disclosure, and record-keeping to conduct limited operations at the end of a potentially years-long registration and approval process. The bill also allows the Commodity Futures Trading Commission to take enforcement action against companies that have completed the “intentional notice” process.

Jackson’s amendment did not receive committee approval.

However, the committee did support an amendment proposed by Representative Yadira Caraveo, which aimed to modify the “intentional notice” provision. Under this amendment, these companies are obligated to inform consumers that they have not yet received full approval.

Innovation was the theme of the Fit21 bill hearing, with supporters believing that the bill will make the United States the center of potentially revolutionary emerging technologies. Republican Representative Tom Emmer of Minnesota said, “America’s leadership position in the global economy is enhanced by our ability to use innovation to make markets and communication more efficient.”

Opponents argue that innovation for the sake of innovation is dangerous. Congressman Brad Sherman (Democrat from California) questioned whether the crypto industry has any innovation, saying at the hearing, “I don’t believe [Satoshi Nakamoto] was innovative.”

The CFTC is more welcoming to crypto companies than the SEC and is popular in the industry. Democrats say this could lead to future fraud. However, Republicans who support the bill believe that the additional $120 million in funding recently approved by the Agriculture Committee will provide the CFTC with more budget to complete its regulatory work.

Therefore, there is still uncertainty as to whether the bill will be passed in the Democrat-controlled Senate.

Author: LianGuaiBitpushNews Mary Liu

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