Crypto community split on FIT21 bill — is it good or bad news?
The US House of Representatives passed the Financial Innovation and Technology for the 21st Century Act (or FIT21) on Wednesday, in a vote of 279 to 136.
Marking an apparent turning point in US political opinion towards crypto, 71 Democrats voted for the bill, despite the White House voicing concerns that it “lacks sufficient protections,” and urging for “further time” for “continued collaboration.”
The bill could still be blocked by the Senate before becoming law, something that some in the crypto community may be banking on.
Crypto advocates have long been calling for regulatory clarity in the face of what they see as an aggressive and intentionally vague Securities and Exchange Commission (SEC). However, while the bill appears to deliver a clearer set of rules, some remain cynical.
The good
The bill sets out a ‘five-prong decentralization test’ to potentially classify certain assets as commodities, explains drjasper_eth of liquid staking protocol RocketPool.
Read more: Is Uniswap becoming more TradFi than DeFi?
The criteria focus on elements of control, ownership, and upgradability via governance, as well as rules on marketing as an investment and who is eligible to receive new tokens.
Classification as a commodity would be an advantage to projects that are sufficiently decentralized, keeping them out of reach of the SEC’s enthusiastic approach in pursuing actions against crypto companies.
Many smaller and early-stage crypto projects are currently unlikely to meet the definition, but this could prove beneficial in weeding out the many ‘decentralized in name only’ (DINO) teams that are rampant in the industry.
TradingProtocol co-founder Mikko Ohtamaa predicts that the bill, if it passes, would “[pave] the road for clean blockchain development,” resulting in “all blue-chip blockchains and protocols [moving] to the United States from the shady island countries where they currently reside.”
Read more: Uniswap received a Wells notice — now what?
The bad
Others, though, are hoping that the bill doesn’t make it past the Senate, believing that it amplifies the reach of the Commodity Futures Trading Commission (CFTC), which already has a worrying track record when it comes to crypto enforcement.
Crypto lawyer Gabriel Shapiro argues that this moving of the goalposts represents the worst of both worlds, a “dual regulatory regime.”
Read more: Ooki DAO ghosting CFTC lawsuit could see it lose the case
In another post on X (formerly Twitter), Shapiro claims that many crypto policy experts are aware of this and are secretly rooting against the bill. He goes on to outline his own frustrations working on an early version of the bill before losing faith, describing material in later versions as “clearly coming from CFTC input to make sure they can still regulate DeFi to the ground.”
Who cares?
Bankless’ David Hoffman is aware of the problems with the bill, but is keen to celebrate what he calls a “vote of confidence in crypto” regardless.
However, as Shapiro again points out, cheerleading bad policy purely because of optics will only hamper efforts to resist it down the line. “We will look like complete hypocrites,” he says.
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