Jul 27, 2023 - Economy

Crypto regulatory bill advances to House floor

Illustration of four pillars, one made from a tall stack of papers.

Illustration: Shoshana Gordon/Axios

The crypto industry is closer than ever to getting the regulatory clarity it wants.

Driving the news: On Wednesday, two separate pieces of legislation achieved something no other crypto regulatory bill had before — a vote in Congress.

  • A third is expected to get a committee vote Thursday night.
  • And as a few Congresspeople discuss, debate and vote on whether they should let some crypto bills advance toward becoming law, bipartisan momentum appears to be building behind one that the industry has been watching, Fit21.

Details: Formally known as the Financial Innovation and Technology for the 21st Century Act, Fit21 was advanced by the The House Financial Services Committee Wednesday night by a vote of 35-15.

  • On Thursday it passed out of the The House Agriculture Committee, and now moves to the House floor.

The big picture: With Democrats in the House finance committee breaking from ranking member Maxine Waters (D-Calif.) Wednesday — and possibly again Thursday on a narrower stablecoin bill — crypto policy is looking less like a partisan issue.

Details: Innovation was the theme of Wednesday's markup hearing on the all-encompassing Fit21 bill.

  • Those who supported it argued that the bill would put the U.S. at the center of an emerging technology that could be revolutionary.
  • "The U.S. leadership in the global economy is propelled by our ability to leverage innovations that make markets and communication more efficient," Rep. Tom Emmer (R-Minn.) said.

Those who opposed it argued that innovation for its own sake was dangerous.

  • Congressman Brad Sherman (D-Calif.) questioned whether there was any innovation at all: "I don't believe that [Satoshi Nakamoto] was innovative," he said, pronouncing the name of bitcoin's creator more as "Saratoshi Nagamoto."

Context: Fit21 does a lot of things, including governing how U.S. crypto exchanges can register tokens and list them in a compliant way.

  • Part of the contention is it provides a path for a digital asset to move out of the SEC's authority and into the CFTC's.
  • Of note: That would align with this month's Ripple court decision.

Zoom in: Congressman Stephen Lynch (D-Mass.) argued over the finer details, like whether the commodities regulator has enough resources to step in where the SEC leaves off. He called it a "bad bill" and urged others not to vote in favor of it.

  • Chair Patrick McHenry responded to the question of resources by pointing to the $120 million of funding in the bill over three years.

Zoom out: Folks in the industry who spoke to Axios before the votes, on condition they not be identified, said it would take many "little miracles" over the next three months before either bill — Fit21, or the stablecoin bill — advanced to the Senate.

Reality check: Schoolhouse Rock's "How a Bill Becomes a Law" is sung in the style of blues.

  • And while the bill in the cartoon climbs rolling hills set against a blue sky, crypto bills' path to becoming law is a bit more hellfire and brimstone.

What we're watching: If things shake out Thursday with the stablecoin bill vote the way they did Wednesday for crypto, the cloud of regulatory uncertainty looming over the industry could break.

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