What is the FIT21 Bill?
With the rapid development of the cryptocurrency market, the United States House of Representatives is facing an important decision – whether to pass the Financial Innovation and Technology for the 21st Century Act (FIT21). This bill has a profound impact on the future development of the US digital asset industry, attracting the attention of many users.
As the digital asset market continues to grow, the current regulatory framework for cryptocurrencies in the United States is scattered and incomplete. This not only confuses startups and operators in the development process but also provides opportunities for bad actors.
In this context, the United States has proposed the FIT21 Bill, hoping to establish a comprehensive regulatory framework that clarifies the regulatory responsibilities of cryptocurrencies, especially in the definition of commodities and securities. Importantly, when regulations are well-defined, there is also an opportunity for professionals in the United States to establish the country’s position in the cryptocurrency asset industry.
Why is the FIT21 Bill important?
The FIT21 Bill not only provides a clear framework for the classification of digital assets but also affects the competitiveness of the United States in the global digital economy.
If the FIT21 Bill is passed, it will be clearer which digital assets are regulated by the Commodity Futures Trading Commission (CFTC) and which are regulated by the Securities and Exchange Commission (SEC). This is important because there are key differences between the definitions of “commodity” and “security,” which also affect the current regulatory approach.
If the blockchain or digital ledger being used today is “functional and decentralized,” then the CFTC will regulate digital assets as commodities. If blockchain-related projects are “functional but not decentralized,” then the SEC will regulate digital assets as securities.
This clear distinction will help startup companies and investors better understand their legal rights and obligations, reduce regulatory uncertainty, and promote innovation and development.
Definition of decentralization in the bill: Apart from other requirements, no one has unilateral control over the blockchain or its use, and no issuer/related party has control over more than 20% of the digital assets or their voting rights.
Additionally, the bill also stipulates other consumer protections, such as customer fund segregation, lock-up periods for token insiders (to incentivize innovation and prevent speculation), annual sales volume limits, and disclosure requirements for projects.
Once these regulatory frameworks are in place, the United States is likely to experience unprecedented growth and innovation in the blockchain market and economy.
How does a16z view this bill?
Of course, this bill is not perfect. Many industry insiders are concerned that the FIT21 Bill will create a very high threshold for decentralization or give the SEC too much jurisdiction.
However, a16z, a well-known venture capital firm deeply involved in the cryptocurrency industry, believes that having no regulation is unrealistic, and having clear rules is always better than chaos. Clear regulations and compliance norms also help innovators build trust with the public and provide useful products while holding bad actors more accountable.
a16z emphasizes that the cryptocurrency industry has existed for over a decade, but the United States still lacks a comprehensive regulatory framework for digital assets. The current regulatory framework is fragmented, incomplete, and lacks clarity, creating an environment of uncertainty and becoming a breeding ground for bad actors. Meanwhile, legitimate entrepreneurs and startups have been constrained by questionable law enforcement and regulations.
In this situation, when other jurisdictions provide clearer and more favorable regulatory environments, entrepreneurial activities will shift overseas, which is detrimental to the overall economic development of the United States.
Although there are still some controversies and discussions, the FIT21 Bill provides the much-needed regulatory clarity for the cryptocurrency industry. This is crucial for the continued operation and innovation of the entire industry. In the coming weeks, the bill will be voted on in the House of Representatives, and the world is watching to see if the United States can find a perfect balance between promoting innovation and protecting consumer rights.