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Financial Innovation and Technology for the 21st Century Act Markup
What happened?
This week on Wednesday, the House Financial Services Committee (HFSC) held a first-of-its-kind digital asset markup for the Financial Innovation and Technology (FIT) for the 21st Century Act (H.R. 4763).
Several amendments were introduced to the bill, some of which DEF covered on Twitter. Of the amendments, the following were passed:
Requiring the Securities and Exchange Commission (SEC) and Commodities Futures Trading Commission (CFTC) to jointly issue rules or guidance within 30 days of the bill’s enactment that would outline their process in delisting a digital asset that they deem inconsistent with the Commodities Exchange Act, securities laws, or the FIT;
Including an additional 30 days for the SEC to review a blockchain system’s certification of decentralization and make a determination about whether it meets the definition of a “decentralized network,” as well as the public comment period in conjunction with said determination;
Removing section 504 of the act, which would have modernized and included innovation in the SEC’s mission; and
Including a study on expanding financial literacy.
The FIT21 Act was voted out of HFSC with 35 ayes and 15 nays.
On Thursday, the House Committee on Agriculture (House Ag) reviewed the bill and passed the following amendments:
Adding the requirement to section 105 that a person intending to register within the CFTC’s jurisdiction under the bill must be a member of a futures association, comply with their rules for customer disclosures and protection of customer assets, and disclose that they are not yet registered and regulated with the CFTC, and that futures associations must adopt rules for said person within 180 days;
Requiring potential registrants to disclose a physical address, provide the SEC and CFTC with descriptions of digital assets they intend to sell, and provide customer disclosures relating to custody of digital assets;
Prohibiting digital commodity exchanges and digital commodity brokers and dealers from denying access to customers who refuse to waive the right of segregation of customer funds; and
Requiring digital commodity exchanges to provide customers with additional disclosures regarding trading volume and volatility, and mandating the CFTC to establish rules for ensuring that said disclosures “are in a simple, standard, and comprehensible format.”
House Ag also moved the bill out of committee by a voice vote. Next, the bill may be considered by the full House of Representatives, along with recommendations, proposed amendments, and reasons supporting its passage from the Committees.
What does this mean?
Importantly, two critical committees, the House Financial Services and Agriculture Committees, collaboratively developed and passed the FIT21 Act, a summary of which can be found here,
Multiple provisions of the Act are intended to settle several hotly-debated digital asset policy issues. For example, the bill proposes a certification process to determine the level of decentralization of blockchains and clarifies that an asset delivered pursuant to an investment contract is not necessarily a security itself.
The Blockchain Regulatory Certainty Act Passes Congressional Committee What Happened?
On Wednesday, HFSC also considered the Blockchain Regulatory Certainty Act (BRCA) (H.R. 1747). The bipartisan bill would codify existing FinCEN policy and provide legal certainty to developers and infrastructure providers like miners, validators, and wallet providers.
Introduced by House Majority Whip Tom Emmer (R-MN), the bill aims to clearly establish that crypto market participants that do not custody or control user funds—in other words, those that do not transmit money on behalf of others—are not money transmitters.
The bill passed out of HFSC with 29 ayes and 21 nays without amendments.