Original author: a16z

Original compilation: Deep Tide TechFlow

At the end of this month, there will be a vote in the House of Representatives on an important bill (H.R. 4763), and we think you should keep an eye on the matter.

The Financial Innovation and Technology for the 21st Century Act, also known as the FIT 21 Act, if passed, would make the regulation of Crypto Assets in the United States clearer, benefiting every practitioner in the industry. If passed, this bill would:

• Provide a safe and efficient way for Blockchain projects to launch in the United States;
• Clarify the boundaries between the SEC and the CFTC, i.e. who regulates what actions in crypto assets, and whether digital assets are securities or commodities;
• Ensure oversight of Crypto Assets exchange and further protect U.S. consumers through the implementation of Crypto Assets transaction rules.

We'll share with you below why it's all so important.

What does this bill include?

FIT 21/HR 4763 establishes a regulatory framework for the U.S. digital asset market to:

Addressing the unique structure of digital assets; ** Provide clear and robust consumer protection measures; ** Clarify which digital assets are regulated by the Commodity Futures Trading Commission (CFTC) and which digital assets are regulated by the SEC (SEC). This is important because there are important differences in the definitions of "commodities" and "securities", which have important implications for how they are regulated.

• The CFTC will regulate digital assets as a commodity if the Blockchain or digital ledger on which the digital asset runs is functional and decentralized.
• If its associated Blockchain is functional, but not Decentralization, the U.S. SEC will regulate digital asset as a security.

The bill defines Decentralization as, among other requirements, that no one has unilateral power to control the Blockchain or its use, and that no issuance or affiliate has 20% or more control of the digital asset or voting rights in the digital asset.

The Act also provides for other consumer protection requirements, such as the segregation of client funds; Lock-up period for Token insiders (to incentivize innovation rather than just speculation); Annual sales volume limits; and disclosure requirements.

These protections are somewhat similar to those imposed by regulators after the Great Depression, after the exuberance of the 20s and the stock market crash of 1929, and once they were established, the United States ushered in an era of unprecedented market and economic rise and innovation.

What's in this bill?

Some industry insiders are concerned that the bill gives SEC jurisdiction over long because it sets a very high bar for Decentralization and the ability to reclaim any refocused Token or projects. There are also concerns that the bill does not draw clear lines on the jurisdiction of the SEC and Commodity Futures Trading Commission.

However, while this bill is not perfect, it will provide the encryption industry with the regulatory certainty it needs to continue operating and innovating in the United States.

Some will ask, why is any form of regulation needed? No regulation is unrealistic, and clearer rules are better than chaotic rules. A clear path to regulation, as well as corporate compliance, allows innovators to build trust with the public and deliver useful products, while holding any actors with bad intentions more accountable.

Who's behind it?

FIT 21 is a joint effort of the House Financial Services Committee (which regulates the SEC) and the House Agriculture Committee (which regulates the Commodity Futures Trading Commission) and also has industry support. Last July, the Financial Services Committee passed the bill, which was supported by six Democrats and all Republicans on the committee, while also passing the Agriculture Committee by unanimous agreement. Since then, the bill has enjoyed bipartisan support.

Why now, and what can you do to help?

A vote on the bill will take place in the coming weeks, and it will be a referendum on Crypto Assets in the United States.

Therefore, it is critical to ensure that the bill is passed with strong bipartisan support. After that, it also needs to be passed in the Senate and signed into law by the president. So, we're now at a critical juncture. To do your part, we urge you to contact your local representative through the Stand with Crypto website. **

Why is this important?

Although the encryption industry has been around for more than a decade or long, in the U.S., digital asset has yet to establish a comprehensive regulatory framework, and the current regulatory framework is fragmented, incomplete, and lacks clarity. This regulatory uncertainty not only creates a confusing environment for innovation, but also provides a breeding ground for bad actors. As we've seen, it's easy for companies and individuals with bad intentions to launch products that take advantage of regulatory shorts.

At the same time, responsible actors – legitimate entrepreneurs and startups – have been subjected to dubious "enforcement-based regulation". This practice harms U.S. innovation, especially as other countries continue to innovate, and is detrimental to the long-term dominance of the U.S. dollar, to U.S. consumers, and to the overall development of the U.S. economy.

Start-up activities tend to move abroad when other jurisdictions offer suitable regulatory regimes. It's not an abstract concern: start-ups create jobs, economic value, and could grow into the next big tech company. For example, Amazon, Apple, Facebook, Google, Microsoft, Netflix, Nvidia, and Salesforce are all businesses founded in the United States, some of which have only been born in the last 20 years. Today they not only dominate market values, but also profoundly affect our daily lives. FIT 21 gives the encryption industry the same potential by creating an environment that supports innovation, while avoiding a situation where a handful of big tech companies monopolize the market and act as gatekeepers for longest.

Whatever you think about Crypto Assets, it's more than just a financial opportunity, it represents a shift in an important technology platform, just as personal computers, mobile phones, and the internet have changed our world. Although the Internet is one of the most important technological innovations in human history, it is failing the consumers, creators, and developers who rely on it today. Blockchain, Crypto Assets, and Web3 can solve this problem in long ways: from long wick candle's forged proofs of authenticity for Depth and long wick candle for AI, to more long voices and choices in social media platforms, to more inclusive payment systems, and more. But we need an enabling environment for these innovations to continue to grow in the United States.

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