U.S. House Approves Blockchain Development Bill

The U.S. House of Representatives took a significant step on Wednesday, voting 279-136 in favor of the Financial Innovation and Technology for the 21st Century Act (FIT21). This bipartisan support marks a crucial milestone for the cryptocurrency industry, as it represents the most substantial legislative achievement for digital assets to date. With a notable number of House Democrats crossing party lines, the bill’s approval signals a strong desire to establish clearer regulations for the digital asset market.

FIT21 is the first major cryptocurrency bill to successfully pass through one chamber of Congress. The next challenge lies in the U.S. Senate, where the bill’s future remains uncertain. Unlike the House, the Senate has not yet introduced a counterpart bill, and the level of support for similar legislation is unclear. The Senate’s relevant committees have also not dedicated the same amount of effort to the crypto issue, which adds to the uncertainty of the bill’s prospects.

The United States has lagged behind other countries in creating comprehensive regulations for the cryptocurrency sector. Despite Wednesday’s victory, the process of implementing effective oversight is far from complete. Representative Josh Gottheimer (D-N.J.) highlighted the necessity of clear rules for the industry, describing the legislation as “well-reasoned, thoughtful, bipartisan” and emphasizing the importance of collaboration to turn it into law. Gottheimer, along with 70 other Democrats and 208 Republicans, supported the bill, while only three Republicans and 133 Democrats opposed it.

President Joe Biden expressed opposition to the bill through a policy statement, but he did not explicitly state he would veto it. This is in contrast to a recent situation where he threatened to veto a congressional effort to overturn an SEC policy on crypto accounting. SEC Chair Gary Gensler has also voiced strong opposition to FIT21, arguing that it is unnecessary and could undermine existing securities regulations.

The legislation, primarily driven by House Republicans, aims to create a regulatory framework for the U.S. crypto markets. It sets out consumer protections and designates the Commodity Futures Trading Commission (CFTC) as the main regulator for digital assets, specifically overseeing non-securities spot markets. The bill also seeks to clearly define the distinctions between securities and commodities in the context of cryptocurrency.

Representative Maxine Waters (D-Calif.), the ranking Democrat on the House Financial Services Committee, criticized the bill, arguing that it would allow crypto businesses to avoid existing securities laws. She contended that these companies have already profited significantly from what she described as unlawful activities and that the bill would essentially legalize these practices.

Before the vote, the House debated several amendments to the bill proposed by Representatives Greg Casar (D-Texas), Brittany Pettersen (D-Colo.), Ralph Norman (R-S.C.), and Scott Perry (R-Pa.). Casar’s amendment to reduce a crowdfunding exemption from $75 million to $5 million was rejected, but the other proposed changes were accepted.

This legislative move comes at a time when centralized cryptocurrency platforms are dominating Blockchain-related mergers and acquisitions (M&A). According to GlobalData’s 2024 report on Blockchain technology, M&A activity involving Blockchain technology has been on the rise, with 3.7% of all technology M&A deals in 2023 related to Blockchain, up from 2.2% in 2020. The primary targets of these deals have been Blockchain development platforms, mining infrastructure, and crypto exchanges.

Major centralized crypto exchanges like Coinbase and Kraken have led this surge in M&A activity. Between 2014 and 2023, the majority of these transactions were based in the U.S., accounting for 35% of all Blockchain-related M&A deals globally.

The passage of FIT21 by the House represents a significant policy victory for the crypto industry in the United States, despite the strong opposition from some lawmakers and regulatory figures. As the bill moves to the Senate, the debate over the appropriate level of regulation for digital assets will likely intensify. Whether FIT21 can secure enough support in the Senate to become law remains to be seen, but its approval in the House marks a pivotal moment in the ongoing effort to create a more defined regulatory environment for the burgeoning cryptocurrency market.