CryptoLink - May 2024 Updates

On May 22, 2024 the Financial Innovation and Technology for the 21st Century Act (FIT21) (H.R.4763) passed the House by a comfortable margin of 279-136. FIT21 is a proposed landmark piece of legislation that would enact a comprehensive regulatory framework for the digital assets industry. The bill was crafted collaboratively between Republicans on the House Financial Services and House Agriculture Committees and, to the surprise of many— including outgoing House Financial Services Committee Chair Patrick McHenry (R-NC), crypto’s chief advocate on Capitol Hill—it garnered significant Democratic support. In all, 71 House Democrats voted in favor of FIT21, including notable figures like Minority Whip Katherine Clark (D-MA), former Speaker Nancy Pelosi (D-CA), and former Majority Leader Stenny Hoyer (D-MD), as well as senior Dems on House Financial Services, namely the Illinois duo Bill Foster and Sean Casten. Despite SEC Chair Gary Gensler’s strong objections to the bill—Gensler issued a statement in the hours leading up to the vote sharply criticizing FIT21, which would blunt the Securities and Exchange Commission’s (SEC) ability to regulate the crypto industry by enforcement and give regulatory authorities to its sister industry, the Commodity Futures Trading Commission (CFTC)—the overwhelming bipartisan support for FIT21 indicates that it may well be considered in the Senate before the end of the 118th Congress. However, a number of issues complicate its path towards full passage. Chief among them is time—Majority Leader Chuck Schumer (D-NY) determines what is considered on the Senate floor, and Schumer will almost certainly not allow FIT21 to be considered as a standalone bill. However, this late in the Congress, there are only a handful of bills FIT21 could be attached to, and even if it ultimately passes the Senate, the upper chamber will leave its mark on FIT21—by amending what the House passed or by passing similar legislation, such as Sens. Cynthia Lummis (R-WY) and Kirsten Gillibrand’s (D-NY) LummisGillibrand Responsible Financial Innovation Act (S.2281). In either case, the House and Senate would need to reconcile the differences between their two versions of the bill. It would then, of course, still need to be signed into law by the President—and the White House has been reluctant to sign off on other crypto legislation, having previously stalled McHenry and Financial Services Committee Ranking Member Maxine Waters’ (D-CA) Clarity for Stablecoins Act (H.R. 4766). However, in an election year, and with former President Donald Trump championing crypto as a campaign issue, Biden may feel it necessary to throw his support behind FIT to neuter crypto-centric attacks from the Trump campaign.