How the FIT21 Act Aims to Simplify U.S. Cryptocurrency Regulations

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This month is going to be a historical one for the entire crypto industry. The House of Representatives is set to vote on the Financial Innovation and Technology for the 21st Century Act, or FIT21. 

This bill promises to simplify cryptocurrency regulation across the country.

The bill, formally known as HR 4763, is designed to create a clear regulatory framework for all digital assets in the U.S. The bill plans to address the unique structures of digital assets and provide robust consumer protections. 

One of its main purposes is to clarify the regulatory responsibilities of the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC). 

This clarification is important as it will determine whether digital assets fall under the category of securities or commodities, which impacts how they are regulated.

According to the proposed legislation, if a blockchain or digital ledger is functional and decentralized, the CFTC would regulate the corresponding digital asset as a commodity. 

However, the SEC would classify digital assets as security if the blockchain is functional but not decentralized. The bill defines decentralization as a scenario where no single person or affiliated entity controls more than 20% of the digital asset or its voting power.

While the bill has received bipartisan support, it has not been without its critics, even within the crypto industry. Some stakeholders are concerned over the bill’s high demands for decentralization, fearing it gives the SEC excessive power to pull back any tokens or projects that revert to a “re-centralized” status.

Moreover, concerns exist that the bill does not sufficiently clarify the boundaries between the SEC and CFTC’s authorities over the crypto industry. 

Despite these concerns, supporters of FIT21 argue that it will provide the necessary regulatory clarity for the industry to continue operating within the U.S. 

They believe that clearer rules will enable crypto businesses to gain public trust, create valuable products, and hold bad actors accountable.

Also Read How the laws & regulations affecting blockchain technology and cryptocurrencies, like Bitcoin, can impact its adoption