Why is the FIT21 Act important in the United States?
Companies that currently use cryptocurrencies for payments face many difficulties, especially in terms of compliance. When businesses engage in transactions using cryptocurrencies, they are often required to comply with regulations from different countries. This includes requirements for anti-money laundering (AML) and know your customer (KYC) regulations. These compliance requirements can vary depending on the region, which increases the costs and complexity of compliance for businesses. In some jurisdictions, businesses need to obtain specific licenses to legally use cryptocurrencies for payments.
For example, in the United States, some states require businesses to obtain cryptocurrency-related business licenses, such as the BitLicense in New York. The application and maintenance costs for these licenses are high, and the process is cumbersome.
Compared to traditional payment systems like credit cards, the compliance requirements for cryptocurrencies are more stringent. Using credit cards for transactions does not require businesses to obtain Payment Card Industry Data Security Standard (PCI-DSS) certification, which is an industry standard for protecting credit cardholder data. This double standard creates more obstacles for the application of cryptocurrencies in payments.
However, this situation may change with the passage of the 21st Century Financial Innovation and Technology Act (FIT21) by the United States House of Representatives on May 22, 2024, with a vote of 279 to 136. This act could become one of the most influential laws for cryptocurrencies in the future.
Further reading:
What is the FIT21 Act, which will be voted on this week, to make the United States a powerhouse in the cryptocurrency industry?
Three key elements for determining whether a digital asset is classified as a security
The act introduces several key elements for distinguishing whether a digital asset is classified as a security or a commodity:
Investment contract (The Howey Test): If the purchase of a digital asset is considered an investment, and investors expect to profit from the efforts of entrepreneurs or third parties, the asset is generally regarded as a security.
Use and consumption: If a digital asset is primarily used as a medium for purchasing goods or services, such as tokens being used to buy specific services or products, it may not be classified as a security but rather as a commodity or another non-security asset.
Degree of decentralization: The act emphasizes the degree of decentralization in blockchain networks. If a digital asset is backed by a highly decentralized network without central authority controlling the network or the asset’s functionality, it is more likely to be considered a commodity.
These definitions and classification standards pave the way for the compliance and legalization of more cryptocurrency assets in the future, effectively ending the gray area that cryptocurrencies have existed in for over a decade, officially entering a new era.
Impact of the FIT21 Act on businesses
The passage of the FIT21 Act will significantly reduce the compliance costs and operational complexity for businesses adopting cryptocurrency payments. This is mainly reflected in the following aspects:
Unified regulatory framework:
The FIT21 Act provides a clear regulatory framework, eliminating the need for businesses to comply with multiple laws and regulatory requirements from different countries. This reduces compliance uncertainty and risk.
Reduced compliance costs:
Due to the unified regulatory requirements, businesses no longer need to apply for multiple licenses in different countries or regions. This will significantly reduce compliance costs, making it more affordable for businesses to engage in cryptocurrency transactions.
Enhanced trust and transparency:
The act emphasizes decentralization and transparency, which helps enhance trust in the cryptocurrency market. Businesses and consumers will be more willing to accept cryptocurrencies as a legitimate payment method.
Promoting technological innovation:
The FIT21 Act supports technology and innovation, particularly in the areas of decentralized finance (DeFi) and non-fungible tokens (NFTs). This will drive more technological innovation, improve the security and convenience of decentralized wallet services, and attract more businesses to adopt them.
As more cryptocurrencies meet regulatory requirements, businesses will be able to expand their markets, reach more consumers using cryptocurrencies, and potentially become a widespread payment solution for businesses.
The deployment and prospects of NoFi
This is why I have always been optimistic about the future development of NoFi. This trend not only demonstrates the enormous potential of blockchain technology but also showcases the infinite possibilities of future financial services. Compared to traditional financial services, the distinction between cryptocurrencies and other securities lies in the fact that NoFi offers us more autonomy, better security, and greater flexibility. This is why KryptoGO focuses on developing non-custodial wallet services. Through NoFi, we can provide more attractive solutions for businesses and consumers, reducing transaction costs, enhancing security, and achieving true decentralization.
The passage of the FIT21 Act has provided great impetus for the development of NoFi. This act not only provides legal protection for DeFi projects but also injects new vitality into the entire cryptocurrency industry.
I believe that in the future, NoFi will play an increasingly important role in the field of financial services and bring more innovation and change. With the rise of NoFi, we will see more application scenarios and market opportunities. High-quality non-custodial wallet services can help more businesses undergo digital transformation and drive progress in the entire industry.
Opinion articles present diverse views and do not represent the position of “WEB3+.”
Proofread by Yuan-Ting Shao.