House passes bill outlining new framework for crypto regulation despite SEC resistance

The House on Wednesday passed legislation that establishes a new framework for when cryptocurrencies should be regulated by the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC).

The lower house voted 279-136 to pass the Financial Innovation and Technology for the 21st Century (FIT 21) Act, despite opposition from SEC Chairman Gary Gensler. Seventy-one Democrats joined 208 Republicans in supporting the measure.

FIT 21 would classify digital assets such as cryptocurrencies as CFTC-regulated commodities if the blockchain they run on is “functional and decentralized.”

If your blockchain is “functional but not decentralized,” they would be considered securities and fall under the purview of the SEC.

Gensler argued in a statement Wednesday that the legislation would “create new regulatory loopholes and undermine decades of precedent regarding oversight of investment contracts.”

“The crypto industry’s history of failures, frauds and bankruptcies is not because we have no rules or because the rules are not clear,” the SEC chairman said before the House vote. “It’s because many participants in the crypto industry don’t follow the rules.”

“We should make the political choice to protect the investing public rather than facilitating the business models of non-compliant companies,” he added.

Gensler noted that FIT 21 would abandon the Supreme Court’s long-standing test for securities classification and allow issuers to self-certify that their products are decentralized, making them digital commodities and removing them from SEC oversight.

This would allow much of the crypto industry to operate under “a light-touch regulatory regime” with the CFTC, argued Rep. Maxine Waters (D-Calif.), ranking member of the House Financial Services Committee, on the House floor Wednesday. fair.

“This is a bill where crypto companies decided they didn’t like the SEC, they didn’t want to be regulated and they were going to go to the United States Congress and they were going to use their power and they were going to use their employees to change the rules of the game,” he said. Waters.

Gensler is an unpopular figure in the industry due to his frequent enforcement actions against crypto companies and his hesitancy to approve new crypto-based assets.

The SEC finally approved several exchange-traded funds (ETFs) that held bitcoin in January, but only after a federal court found that the agency improperly rejected a spot bitcoin ETF application.

Rep. French Hill (R-Ark.), who testified before the House Rules Committee in favor of the legislation on Tuesday, stated that it “does not create a ‘soft’ regime for crypto criminals nor prevent the SEC from being able to to police their markets.”

“This bill does not create title loopholes. This bill does not deregulate crypto,” said the chairman of the House Financial Services Subcommittee on Digital Assets, Financial Technology and Inclusion.

Instead, House Financial Services Chairman Patrick McHenry (RN.C.) argued Wednesday that the bill helps resolve confusion under the current regulatory framework, in which the SEC and CFTC they are “in a food fight for control of these asset classes”.

“FIT 21 fixes this by creating a regulatory framework that will provide clear rules of the road and strong guardrails for American engagement with the digital asset ecosystem,” McHenry said on the House floor.

Although the White House said in a statement Wednesday that it opposes FIT 21 due to its lack of “sufficient protections for consumers and investors,” it did not expressly threaten to veto the legislation.

“The Administration looks forward to working with Congress to ensure a comprehensive and balanced regulatory framework for digital assets, building on existing authorities, that will promote responsible digital asset development and payments innovation and help reinforce U.S. leadership. in the global financial system,” he said.

Sheila Warren, CEO of the Crypto Council for Innovation, called Wednesday’s vote a “defining moment for the crypto industry.”

“The permafrost is thawing and there is a sense of positive momentum across D.C.,” Warren said in a statement.

Blockchain Association CEO Kristin Smith emphasized the bipartisan nature of the vote.

“This bipartisan vote signals that policymakers on both sides of the aisle recognize the immense potential of blockchain technology and digital assets, while also recognizing the need for regulatory guidelines to enable responsible innovation and prioritize consumer safeguards,” he said. Smith.

Updated at 6:12 pm EDT.

This story originally appeared on thehill.com read the full story