Is the House’s FIT21 Bill Really the Legislation That Crypto Needs?

While many in the industry cheered the passing of the Financial Innovation and Technology for the 21st Century Act yesterday, many other raised criticisms and concerns.

The House of Representatives passed the Financial Innovation and Technology for the 21st Century Act on Wednesday, advancing a measure that would set up a regulatory framework for digital assets.

The bill passed 279 to 136, largely along party lines, with the vast majority of Republicans supporting the bill and 71 Democrats voting against it. The bill will now head to the Senate, though it is unlikely to be taken up this year.

If passed, the bill would give the Commodity Futures Trading Commission (CFTC) the authority to oversee digital assets that are deemed to be commodities, while the Securities and Exchange Commission (SEC) would continue to oversee those that are classified as securities.

This would mark a significant shift in the regulatory landscape for crypto, as the SEC has largely taken the lead in regulating the industry to date, despite lacking explicit authority to do so.

However, some crypto legal experts have raised concerns about the bill, arguing that it does not go far enough in shifting regulatory oversight away from the SEC.

“It does not even shift agencies; SEC would still have huge power. It provides for a dual regulatory regime, split between SEC and CFTC. It does this by giving the CFTC authority it never had—regulatory authority over a spot commodities market,” crypto legal expert Gabriel Shapiro said on X. “Man we have been psyopped so bad on this FIT21 thing.”

“There has never before been a spot commodities market that is *regulated*...we are just handing this authority over wholesale to the CFTC and hoping they are not insane fascists like Gary (but he used to be head of CFTC lol),” he added.

Others have also pointed out that the bill may not give the CFTC the broad authority it needs to effectively oversee the crypto markets.

“This bill needlessly creates more jurisdiction for the CFTC over spot and a walled garden for incumbents, among other things. But you dipshits kept asking for new laws,” Stephen Palley, a partner at Brown Rudnick, said.

The bill has also faced criticism from Maxine Waters (D-CA), the ranking Democrat on the House Financial Services Committee, who called it one of the worst bills she's ever seen.

She said the bill would stretch the resources of the CFTC, which has only around 700 employees compared to the SEC’s 4,500, and could also undermine other legislative efforts, like the stablecoin bill Waters worked on alongside House Financial Services Chair Patrick McHenry (R-NC).

“Let me let you [in] on a secret that the big crypto doesn't want you to know even under this bill,” Waters said. “The CFTC does not get enough authority to regulate crypto in this bill.”

SEC Chair Gary Gensler has also said the effort would create more confusion and regulatory gaps than it closes. Gensler has said for years that the law is clear and that there should not be bespoke rules for crypto.

Still, many in the crypto industry have viewed the bipartisan vote as a symbolic vote for crypto itself, perhaps a harbinger of a better future. The move comes just days after the House and Senate voted to repeal a controversial SEC accounting rule, which itself was seen as a sign that sanity will ultimately prevail.

If there is a silver lining, many experts think FIT21 is likely to die on the vine. TD Cowen, for instance, said a few weeks ago the bill stood "no chance of becoming law in this Congress.”

So maybe this is one psyop worth celebrating?

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