House Democratic leaders have decided not to strongly oppose two pro-cryptocurrency bills that are expected to receive a vote in the House of Representatives this week.
The Financial Innovation and Technology for the 21st Century Act (FIT21) and the CBDC Anti-Surveillance State Act (H.R. 5403) will face a House vote, likely on Wednesday, May 22, 2024.
However, Representatives Maxine Waters and David Scott, who have been critical of the crypto industry, will not actively whip (urge party members to vote against) these bills.
TLDR
- House Democratic leaders Maxine Waters and David Scott decided not to whip (urge party members to vote against) two pro-crypto bills: the Financial Innovation and Technology for the 21st Century Act (FIT21) and the CBDC Anti-Surveillance State Act (H.R. 5403).
- FIT21 proposes a new regulatory framework for digital assets, making the Commodity Futures Trading Commission (CFTC) the primary regulator and clarifying whether a digital asset is a security or commodity.
- Critics argue FIT21 undermines investor protections by treating some digital assets as non-securities, creating a “safe harbor” from SEC rules until the SEC and CFTC finalize their rules.
- The Blockchain Association and Crypto Council for Innovation support FIT21 and have urged House leadership to hold a floor vote on the bill.
- The House is expected to vote on FIT21 this week (as of the article dates in late May 2024).
The FIT21 bill, introduced in July 2023, aims to establish a new regulatory framework for digital assets and cryptocurrency markets.
It proposes making the Commodity Futures Trading Commission (CFTC) the primary regulator for cryptocurrencies.
Additionally, the bill seeks to clarify whether a particular digital asset should be classified as a security or a commodity. Supporters argue this would bring much-needed regulatory clarity to the crypto industry in the United States.
However, Democratic leaders have expressed concerns about certain provisions in FIT21. An email from the Democratic Whip’s office stated that the bill’s language “undermines decades of legal precedent and case law, thereby creating uncertainty in our traditional securities market.”
NEW: House Democratic leaders said today they will NOT whip against House Republicans' crypto bill, I'm told.
The whip question sent to members this a.m. says that Waters and Scott "strongly oppose" the legislation, but does not urge them to vote "no": https://t.co/V3DSjewYzV pic.twitter.com/lORrUIo4RZ
— Eleanor Mueller (@Eleanor_Mueller) May 20, 2024
The email also criticized a “safe harbor” provision that would temporarily shield crypto entities from SEC rules and regulations until the SEC and CFTC finalize new rules for the industry.
Democratic leaders believe this could “weaken investor protections and open the door to fraud and market manipulation.”
Despite these concerns, Waters and Scott have decided not to actively whip against FIT21, leaving Democratic representatives to vote based on their own judgment.
In a separate “Dear Colleague” letter, the two Ranking Members strongly urged their colleagues to vote “no” on the bill, arguing that it would result in “mass deregulation” of cryptocurrencies and some traditional securities. They accused crypto firms of attempting to “legitimize their illegal activities” through the legislation.
On the other hand, the crypto industry has largely welcomed FIT21 as a step towards clearer regulations. The Blockchain Association and Crypto Council for Innovation have both advocated for the bill’s passage, claiming it would provide “pro-innovation and pro-consumer guardrails” for the industry.
In a letter to House leadership, the Blockchain Association stated that the “lack of clarity impedes innovation and hamstrings companies, harming America’s standing in the global technology race.”
The second bill, H.R. 5403 or the CBDC Anti-Surveillance State Act, aims to restrict the Federal Reserve’s ability to issue a central bank digital currency (CBDC).
Democratic leaders believe the bill could have “broad negative consequences,” including undermining the primacy of the U.S. dollar and hampering the Fed’s ability to conduct monetary policy.
However, the American Bankers Association has voiced support for the legislation, arguing that a CBDC is unnecessary and would present “unacceptable risks and costs to the financial system.”
As the House prepares to vote on these two crypto-related bills, the decision by Democratic leaders not to whip against them could be seen as a strategic move.
With the November 2024 elections approaching, the Biden administration may be pivoting towards a more nuanced approach to cryptocurrency regulation, seeking to balance innovation and consumer protection.
Ultimately, the outcome of the FIT21 and H.R. 5403 votes will shape the future regulatory landscape for the crypto industry in the United States.
