Understand the Bill that promises to regulate the crypto market

The FIT21 bill, a comprehensive legislative effort to regulate the crypto market in the United States, is preparing for a vote on the House floor later this May. Despite investment bank TD Cowen’s gloomy projections about its chances of immediate approval, FIT21 is emerging as a crucial catalyst for debates on critical issues such as anti-money laundering and investor protection.

FIT21, dubbed the Financial Technology and Innovation Act for the 21st Century, represents a bipartisan attempt to provide a clear regulatory framework for digital assets. However, according to the TD Cowen Washington Research Group, led by Jaret Seiberg, the prospects of its approval in the current Congress are practically nil. The investment bank points to the lack of preparation of senators and partisan divisions surrounding the legislation as the main obstacles.

“The Senate benches did not do enough preparatory work for the legislation to pass the Senate. Furthermore, Democrats are much more focused on protecting investors than on what is included in this bill”, says the note issued by the bank.

House Financial Services Committee Chairman Patrick McHenry emphasized the importance of FIT21 as a bipartisan effort to bring regulatory clarity. McHenry, who is ending his term in January 2025, has been an active supporter of crypto legislation.

However, even if FIT21 passes the House, it will face challenges in the Senate, where Democratic leaders like Maxine Waters have already expressed opposition to the bill.

What is FIT21 and what does this bill defend?

FIT21, or Financial Innovation and Technology Act for the 21st Century, is a bill drafted in the United States with the aim of regulating the cryptocurrency market and other digital assets.

This bill is considered historic because of its comprehensive approach and the bipartisan effort behind it. Led by Congressman Patrick McHenry, FIT21 seeks to address the regulatory ambiguities surrounding cryptocurrencies and offer a clear framework to govern their operations.

For this reason, the bill aims to address a pressing need for regulatory clarity in the digital asset space. With the cryptocurrency market evolving rapidly, policymakers recognize the importance of establishing clear guidelines. This process ensures transparency, investor protection and market integrity. The ultimate goal is to mitigate the risks associated with digital asset transactions and promote market stability.

The provisions of FIT21 cover a variety of areas related to the cryptocurrency market. This includes regulations on the issuance and trading of cryptocurrencies, the operation of exchanges and wallets, as well as oversight of initial coin offerings (ICOs) and other aspects of the ecosystem. Additionally, the bill seeks to establish guidelines for the taxation and reporting of transactions involving digital assets.

Trump: defender of cryptocurrencies or strategist against Biden?

In addition to political disputes, FIT21 is also facing criticism from the crypto market. Recently, former President Donald Trump expressed support for cryptocurrencies and digital assets, promising to keep businesses in the US.

At an event held at Mar-a-Lago last Wednesday (8), Trump addressed crypto supporters, urging them to consider voting for him. Trump also harshly criticized the regulatory repression that, according to him, the Biden administration unleashed on the industry.

“You better vote for me,” he stated, while promoting his own non-fungible token (NFT). This openness by Trump to crypto investors marks a significant shift from criticism during his first term, although it is not entirely unexpected.

The Republican Party has increasingly adopted a pro-Bitcoin and other digital assets stance in recent years. Meanwhile, top Democrats remain divided over the industry’s legitimacy following a series of controversies. Trump’s direct support for cryptocurrencies represents a landmark moment for companies in the sector, which have made an intense lobbying effort in Washington and invested resources to influence the 2024 elections.

Kristin Smith, CEO of the Blockchain Association, a leading crypto industry lobbying group, commented on Trump’s recent pronouncements. Smith noted that they signal a sea change in the importance of digital assets this election cycle.

This shift also gives Trump a new line of attack against Biden. Securities and Exchange Commission Chairman Gary Gensler, a Biden appointee, has taken a tough stance against crypto companies. Gensler believes many of them violate federal securities laws.

However, TD Cowen warns that Trump’s pro-crypto stance could be volatile. If the speech is merely electoral, it could represent additional uncertainty for the future of regulation in the United States.

US Department of Justice Toughens Line

As FIT21 continues to be the center of attention in Congress, concerns are emerging about the US Department of Justice’s (DOJ) approach to cryptocurrencies. Senators Ron Wyden and Cynthia Lummis have expressed concerns about the DOJ’s expansion of the definition of money transmission, especially following charges against cryptocurrency mixer developers such as Samourai Wallet and Tornado Cash for operating unlicensed money transmission businesses. .

These accusations have sparked debate over the DOJ’s interpretation of the law and its impact on software developers and crypto service providers. Wyden and Lummis argue that the DOJ’s interpretation could criminalize developers for simply writing code used by others. According to the senators, this represents a threat to freedom of expression and technological innovation.

As debates over FIT21 and regulatory policies continue, groups like Coin Center are pushing against the DOJ’s classification of self-custodial wallet developers as money transmitters. They warn that such an interpretation undermines the business foundation that makes the United States a global economic leader and call for a careful review of proposed policies.

As Congress prepares to vote on FIT21 and the DOJ faces criticism for its actions against crypto developers, the future of crypto regulation in the United States remains uncertain. However, these debates reflect not only the complexity of the crypto sector, but also the importance of finding a balance between technological innovation and regulatory security in an increasingly digitized world.