Critical Moment! Major Development in US Crypto Bill to Be Decided by End of Month

Original Author: a16z crypto

Original Translator: Kaori, BlockBeats

Editor's Note: Last night, Ethereum made a significant leap, with an increase of over 20%. The news of an Ethereum spot ETF has stimulated the market. Besides this major event this month, there has also been significant progress on the U.S. cryptocurrency bill. The official a16z crypto account published an article last night interpreting the "21st Century Financial Innovation and Technology Act," also known as FIT21, which can make U.S. cryptocurrency regulation clearer for everyone working in or looking to develop in this industry. As previously reported by BlockBeats, on May 21st, Politico reporter Eleanor Mueller posted on the X platform, stating that sources revealed to her that House Democratic leaders today indicated they will not oppose the House Republicans' crypto bill.

The following is the original content:

An important bill for our industry: Why it matters and what you can do

By the end of this month, the House will vote on a major bill (HR 4763) — one we think you should pay attention to. It's called the "21st Century Financial Innovation and Technology Act," also known as FIT21, which can make U.S. cryptocurrency regulation clearer for everyone working in or looking to develop in this industry.

If this bill passes, it should:

1. Provide a safe and effective path for blockchain projects to launch in the U.S.;

2. Clarify the jurisdiction between the SEC and CFTC on who regulates cryptocurrency and whether digital assets are securities or commodities;

3. Ensure oversight of cryptocurrency exchanges and further protect U.S. consumers by implementing cryptocurrency trading rules.

Why It Matters: The Big Picture

Despite the crypto industry's decade-long existence, the U.S. still lacks a comprehensive regulatory framework for digital assets. Our current regulatory framework is fragmented, incomplete, and lacking clarity. This regulatory uncertainty not only creates a confusing environment for innovation but also provides a breeding ground for bad actors. As we have seen, malicious companies and individuals can easily launch products exploiting regulatory loopholes.

At the same time, responsible participants — legitimate entrepreneurs and startups — face suspicious "enforcement" practices. This approach harms U.S. innovation, especially as other countries innovate and does not bode well for the long-term dominance of the U.S. dollar, U.S. consumers, and the overall U.S. economy. When other jurisdictions offer properly calibrated regulatory regimes, it leads to startup activity shifting overseas.

This is not an abstract issue: Startups can create jobs and economic value and can spawn the next big tech company. For example, Amazon, Apple, Facebook, Google, Microsoft, Netflix, NVIDIA, and Salesforce all originated in the United States—some only in the past 20 years—and they not only dominate today's market cap but also dominate our daily lives.

With FIT21 creating a supportive environment for innovation, cryptocurrency can also have similar potential without creating large tech companies that act as gatekeepers for the majority of people.

However you view cryptocurrency, it is not just a financial opportunity—it represents a significant technological platform shift, much like personal computing, mobile phones, and the internet changed our world. Despite the internet being one of the most important technological innovations in human history, it has let down those who rely on the internet today: consumers, creators, and developers.

Blockchain, cryptocurrency, and web3 can help address this issue in many ways: from authenticity proofs addressing deep fakes and personhood proofs targeting AI to more voices and choices on social media platforms to more inclusive payment systems, and much more. But we need a supportive environment for these innovations to continue to flourish in the United States.

What's in the Bill?

FIT21 seeks to ensure a regulatory environment that allows blockchain technology to thrive in a way that protects the U.S. market and consumers. Specifically, the FIT21 bill / HR 4763 establishes a regulatory framework for the U.S. digital asset market to:

· Address the unique structure of digital assets—thus supporting the unique needs of new technologies and their opportunities;

· Provide clear, robust consumer protections—thereby supporting the dual goals of consumer protection and innovation;

· Clarify which digital assets are under the Commodity Futures Trading Commission (CFTC) oversight and which are under the Securities and Exchange Commission (SEC) oversight. This is crucial because there is a key difference between the definitions of "commodity" and "security," which impacts how they are regulated. Specifically:

The CFTC will regulate digital assets as commodities, "if their underlying blockchain or digital ledger is functional and decentralized."

The bill defines decentralization as: "In addition to other requirements, if no single party has unilateral control over the blockchain or its use, and no issuer or affiliated person controls 20% or more of the digital assets or voting rights of the digital assets."

The bill also sets out other consumer protection requirements, such as customer fund segregation; lock-up period for token insiders (to incentivize innovation rather than just speculation); annual sales limits; and disclosure requirements. These are no different from the protective regulations implemented after the Great Depression, the excesses of the 1920s, and the stock market crash of 1929—once these guidelines were in place, the U.S. market and economy saw unprecedented growth and innovation.

What's Not in the Bill?

Some industry insiders have expressed concerns that the bill sets a very high bar for decentralization and gives the SEC excessive jurisdiction by being able to pull back any "recentralized" token or project. Some are also concerned that the bill does not establish clearer boundaries between SEC and CFTC jurisdiction.

However, while the bill is not perfect, it will provide the regulatory certainty needed for the crypto industry to continue operating and innovating in the U.S.

Some have asked, why such provisions? It is argued that no regulation is not realistic, and clearer rules are better than chaotic rules. Regulation, along with a clear path to corporate compliance, enables innovators to build trust and useful products for the public while holding any malicious actors more accountable.

Who Is Behind the Bill?

The FIT21 bill is a joint effort of the House Financial Services Committee (responsible for regulating the SEC) and the House Agriculture Committee (responsible for regulating the CFTC), incorporating feedback from the industry. Last July, the bill received approval from the Financial Services Committee with the support of six Democratic members and all Republicans, while also receiving unanimous approval from the Agriculture Committee. It has since garnered bipartisan support.

Why Now? How Can You Help?

In the coming weeks, the vote on the bill will be a national referendum on cryptocurrency in the U.S. Therefore, the bill must receive strong bipartisan support to pass. Subsequently, the bill will need to pass the Senate and be signed by the President to become law.