FIT21 Passes House of Representatives as 71 Democrats Vote With Republicans, Gary Gensler Opposes, Joe Biden “Will Not Veto”

Key Takeaways

• The FIT21 bill, which aims to protect crypto customers, passed the US House but faces an uncertain Senate path.
• According to latest reports, President Joe Biden will not veto the bill.
• Even with Senate approval, FIT21’s journey to law is long, with potential revisions.
• The crypto industry supports FIT21 as a step towards clear regulations, while regulators like Gensler express concerns.

The Republican-led Financial Innovation and Technology for the 21st Century Act (FIT21), or H.R. 4763, passed the US House of Representatives on May 22 with bipartisan support. A total of 71 Democrats and 208 Republicans voted in favor, with 136 against.

President Joe Biden has a ten-day window to either sign or veto the bill, but recent statements indicate he will not reject it. FIT21 proposes a clear regulatory framework in the United States. If passed, it would give the Commodities Futures Trading Commission (CFTC) more oversight, and would help clarify which cryptos were commidities and which were securities.

FIT21 Clears House Hurdle, But Senate Path Clouded by Obstacles

However, the Bill faces Senate uncertainty because of its lack of a companion bill and opposition from cryptosceptic senators. This comes despite the Senate recently passing a resolution that opposes restrictions on banks and crypto firms doing business together.

The journey of FIT21 through the 100-member Senate could stretch over several months. This is because there is no set timeline for when Senators must address the bill.

According to former Speaker of the House Nancy Pelosi, who also voted for the Bill:

“FIT21 is a first step to establish a regulatory framework for digital assets – and it must be improved by working with the Senate and the Administration.  While building a foundation for responsible innovation, we must take further action to strengthen guardrails for consumers, investors and taxpayers.”

The veteran Democrat added:

“Digital currency is already integrated into our economy and will only grow in significance in the years to come.  Millions of Americans own cryptocurrency.  American companies are the cutting edge of global financial technology.  Many jobs in my Bay Area community are dependent on this industry.

“The digital asset industry needs clearer rules of the road and the federal government needs stronger enforcement authority in order to ensure the responsible development of this emerging technology.”

Complex Legislative Journey and Uncertain Presidential Approval

Should the Senate decide to take action, FIT21 is likely to undergo a rigorous process involving committee assignments, reviews, hearings, and markups.

Progress would require the support of a majority—51 votes. Even then, the bill could see modifications as House and Senate members convene to reconcile differences between their respective versions. Following these negotiations, the amended bill would need to pass through both the House and Senate again for final approval.

While the Biden administration expressed opposition to the bill on May 22, it stopped short of indicating a definite veto. Recent announcements indicate that President Biden will not veto the bill.

Crypto Industry Cheers FIT21’s House Passage and Calls for Clearer Rules

The bill’s passage in the House has been celebrated by the crypto industry as a significant early victory. SEC Chair Gary Gensler, however, criticized FIT21 on the same day, arguing that it introduces “new regulatory gaps” and could destabilize capital markets.

Gensler highlighted a January Chainalysis report , citing “widespread noncompliance” in the crypto industry leading to fraud and failures. However, Chainalysis noted a significant decrease in illicit crypto activities in 2023.

Gensler said:

“The crypto industry’s record of failures, frauds, and bankruptcies is not because we don’t have rules or because the rules are unclear. It’s because many players in the crypto industry don’t play by the rules. We should make the policy choice to protect the investing public over facilitating business models of noncompliant firms.”

Meanwhile, Coinbase CEO Brian Armstrong hailed the bipartisan support for the bill , particularly the 71 Democrats who voted in favor, as “a total victory” and a step toward “clear crypto rules.”

Meanwhile, Jake Chervinsky, legal chief at Variant Fund, interpreted the Democratic support as a sign of “no confidence” in the current SEC’s approach to cryptocurrency.