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House passes historic crypto bill. Here's why it's a 'massive step forward' for the industry.

By Chris Matthews

71 Democrats voted for the bill, which faces long odds in Senate

The House of Representatives passed landmark crypto legislation Wednesday with strong bipartisan support, signaling a potential sea change in Washington's attitude toward the digital-asset sector.

The lower chamber voted to approve the Financial Innovation and Technology for the 21st Century Act by a vote of 279 to 136, with near unanimous support from Republicans and 71 Democrats voting in favor of the bill.

Notable Democrats voting for the measure included former Speaker Nancy Pelosi of California and the House Minority Whip, Rep. Katherine Clark of Massachusetts.

Pelosi said in a statement that the measure was a "first step" and that she hoped to work with the Senate and Biden administration to improve the bill.

"Digital currency is already integrated into our economy and will only grow in significance in the years to come," she added. "Millons of Americans own cryptocurrency. Many jobs in my Bay Area community are dependent on this industry."

The law would create a tailored disclosure and registration regime for digital-asset companies, and grant primary responsibility for regulating the industry to the Commodity Futures Trading Commission at the expense of the Securities and Exchange Commission.

The digital-asset sector has long complained that the SEC's insistence that these enterprises conform to traditional disclosure regimes is unworkable.

The bill faces long odds in the Senate, where several lawmakers have crafted their own bills seeking to overhaul crypto regulations.

"The Senate typically doesn't take House bills and just vote on them. It does its own thing," wrote a financial-services analyst with Capital Alpha Partners, in a Wednesday client note. "So while the Senate might eventually be interested in considering some kind of crypto legislation, it almost surely won't be this one."

SEC Chair Gary Gensler came out forcefully against the bill in a public statement Wednesday morning - a rare example of a top financial regulator attempting to publicly sway Congress.

The legislation "would create new regulatory gaps and undermine decades of precedent...putting investors and capital markets at immeasurable risk," he said.

Gensler also argued that the law would give fraudsters a way to avoid securities laws by cynically declaring their products to be crypto assets.

The regulator remained confident that his view of the situation will win the day, despite Wednesday's bipartisan vote.

He said in an interview at the Investment Company Institute conference Thursday that his views crypto are "gaining traction in the courts" and that he believes "the SEC has the legal tools" under existing law to regulate the digital asset industry.

Gensler did say however, that the CFTC could "use some more authority" to regulate spot crypto commodity markets.

The industry cheered both the bipartisan vote and a statement Wednesday from the Biden administration, which said that while it does not support the FIT-21 legislation, it didn't threaten to veto it.

"The administration is eager to work Congress to ensure a comprehensive and balanced regulatory framework for digital assets...[to] promote the responsible development of digital assets," the statement said.

Faryar Shirzad, chief policy officer at the crypto exchange Coinbase (COIN), called the statement "a massive step forward" because, for the first time, the White House is acknowledging the need for comprehensive crypto legislation that creates a tailored regulatory regime.

Another reason for optimism is last week's vote in the House and Senate to overturn accounting guidance from the SEC that opponents say made it too expensive for financial institutions to custody crypto assets, like bitcoin (BTCUSD) or ether (ETHUSD), for their clients.

The shifting stance of the Biden administration and growing support for reform among Democrats may indicate that politicians see opposing the crypto industry as a potential political liability.

"This bill is a big win for our efforts to depoliticize the issue," North Carolina Democrat Rep. Wiley Nickel said on X Wednesday. "Whether you love crypto or hate crypto you should support regulation. The status quo just isn't working."

-Chris Matthews

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.


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05-23-24 1013ET

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