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The Biden administration has finally expressed its opposition to the FIT21 bill, the Financial Innovation and Technology for the 21st Century Act. In a statement released this Wednesday (22), the White House expressed significant concerns about the bill’s proposed structure, which seeks to regulate cryptocurrencies in the United States.

“The administration opposes the passage of HR 4763, which would affect the regulatory framework for digital assets in the United States,” the statement stated.

Furthermore, the White House has emphasized the need for a balanced and comprehensive regulatory framework for cryptocurrencies. They want to ensure the protection of consumers and investors while promoting innovation in the digital payments sector. To that end, the Biden administration is open to working with Congress and regulators to develop effective regulation.

The debate over cryptocurrencies in the US

FIT21 is scheduled to be voted on in the House of Representatives later today. The bill aims to grant more powers and funding to the Commodity Futures Trading Commission (CFTC) to oversee spot markets for cryptocurrencies and “digital commodities” such as Bitcoin. It also envisions a process to enable secondary market trading of digital commodities.

Despite expectations that FIT21 will not be presented in the Senate this year, its approval in the Chamber could prepare the ground for discussions in the next Congress in January. However, the proposal has met with strong opposition.

Democratic Rep. Maxine Waters of the House Financial Services Committee sharply criticized FIT21 during a Rules Committee session. Waters claims the bill would exhaust the CFTC’s resources, weakening the agency’s ability to oversee the cryptocurrency industry. According to her, the CFTC does not have sufficient authority to adequately regulate cryptocurrencies as established by the project.

Securities and Exchange Commission (SEC) Chairman Gary Gensler also expressed his concerns. He argues that FIT21 could create new loopholes in regulation, undermining the Howey Test, a key legal precedent for determining whether an asset qualifies as an investment contract.

“The cryptocurrency industry has a history of failures, fraud and bankruptcies,” said Gensler. “This is not due to a lack of rules, but because many industry participants do not comply with the rules.”

Currently, there is no complementary bill to FIT21 in the Senate, and key legislators have not shown interest in moving forward with the proposal. Investment bank TD Cowen says the bill had “no chance of becoming law in this Congress.” However, the institution highlights that approval could help clarify the positions of Democrats and Republicans on critical issues, such as anti-money laundering and investor protection.

Political Implications of Cryptocurrency Regulation

Rumors have recently surfaced that the Biden administration could be paying more attention to the political impact of cryptocurrency regulation because of the upcoming presidential election. A Bloomberg analyst suggested that the SEC’s decision to deny applications for Ethereum exchange-traded funds could negatively affect public perception of the Biden administration.

On the other hand, Republican presidential candidate Donald Trump has adopted a pro-crypto stance. Trump announced that he would accept campaign donations in cryptocurrencies, a strategy that could attract voters interested in the digital asset sector.

Alexander Grieve, who works in government affairs at the venture capital firm Paradigm, called the White House statement “a huge course correction.” Grieve suggested that Trump’s support for cryptocurrencies and mobilization of pro-crypto voters may have influenced the Biden administration’s stance. Paradigm supports Stand With Crypto, a non-profit organization that advocates for cryptocurrency regulation and mobilizes voters.

Furthermore, other entities also spoke out. “The White House’s statement is not surprising given that they need to defend their regulators and agencies,” said Scott Mason, senior political consultant at the law firm Holland & Knight. He added that while the White House opposes the legislation, that does not mean President Biden would veto the bill.

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