U.S. House Passes Major Crypto Bill, Shifts Regulatory Power to CFTC

A bill aimed at clarifying the regulatory landscape for cryptocurrencies in the United States is making its way through Congress, though its future remains uncertain as it heads to the Senate and ultimately to President Joe Biden’s desk.

The legislation, known as the Financial Innovation and Technology for the 21st Century Act (FIT21), passed the House of Representatives on May 22. The vote saw 71 Democrats and 208 Republicans in favor, while 136 Democrats opposed it.

However, its prospects in the Senate are unclear, as there is currently no companion bill, and it faces opposition from prominent critics of cryptocurrency, such as Senator Elizabeth Warren. The Senate recently passed a resolution calling to rescind a rule that limited banks and crypto firms from conducting business.

While FIT21 could be up for Senate consideration in the future, there is no timeline for action. If it progresses, the bill would likely undergo committee reviews and hearings before a final vote by the Senate, where a majority of 51 senators would need to approve it.

The content of FIT21 may evolve during the legislative process, as members of both the House and Senate collaborate to reconcile any differences between their versions of the bill. Ultimately, it would require President Biden's signature to become law, though the administration has expressed opposition to the bill without explicitly stating a veto threat.

Despite regulatory challenges, FIT21's passage in the House has been celebrated by the cryptocurrency industry. However, Securities and Exchange Commission (SEC) Chair Gary Gensler has voiced concerns about the bill, citing potential regulatory gaps and risks to market stability.

The bill notably grants more authority to the Commodity Futures Trading Commission (CFTC) to oversee crypto markets, positioning it as the primary regulator for digital commodities like bitcoin. While some in the industry view this as positive, others argue that FIT21 still gives significant power to the SEC and could introduce new regulatory complexities.

Meanwhile, the broader regulatory landscape for cryptocurrencies remains a topic of ongoing debate in Congress. While FIT21 focuses on market structure, other legislative efforts, such as stablecoin regulation, are also being pursued by lawmakers.

Despite divisions within Congress, FIT21 represents a significant step towards establishing a regulatory framework for digital assets in the United States. However, its ultimate fate will depend on further legislative deliberations and potential compromises between lawmakers across party lines.