The winds of change are blowing in a clearer direction, and last week, regulatory efforts targeting cryptocurrencies and digital assets in Washington showed strong signs of progress. After months of anticipation, the US Congress made significant strides in the 21st Century Financial Innovation and Technology Act (FIT21), the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin No. 121 (SAB121), and the CBDC Anti-Surveillance Act. This groundbreaking week marked a new era for the cryptocurrency and digital asset industry in Washington.
The progress made by Congress last week was fueled by the earlier approval of a Bitcoin ETF by the SEC. Blackrock’s Bitcoin ETF became the fastest-growing ETF in history, reflecting the long-term demand for Bitcoin from a trusted brand. The market now expects the SEC to approve an Ethereum ETF soon.
Blackrock’s launch of a digital currency market fund on the Ethereum platform, as well as Larry Fink’s active advocacy for tokenizing the financial markets, have caught the attention of Washington. The United States seems to be rapidly aligning with other jurisdictions such as Europe, the United Arab Emirates, and Asia to provide comprehensive rules for the cryptocurrency and digital asset industry, making it competitive in the new era of global digital financial innovation.
Turning to the future, the 21st Century Financial Innovation and Technology Act (FIT21) passed by the House of Representatives last week is an important manifestation of bipartisan support for the cryptocurrency and digital asset industry. Patrick McHenry, Chairman of the House Financial Services Committee, commented on FIT21 in a public statement, saying, “FIT21 provides the necessary regulatory clarity and strong consumer protection for the digital asset ecosystem to thrive in the United States. The bill also ensures that the United States will lead the future financial system and continue to be the center of technological innovation.”
Sheila Warren, CEO of the Crypto Council for Innovation (CCI), said, “FIT 21 is about investor protection, preventing market manipulation, achieving much-needed regulatory clarity, promoting financial inclusiveness, and protecting national security, among other things. This vote represents the years of relentless efforts by policymakers, their teams, and the entire industry to protect consumers and maintain America’s leadership in digital innovation. It demonstrates that innovation and consumer protection can coexist in the digital asset space.”
J. Christopher Giancarlo, former Chairman of the Commodity Futures Trading Commission (CFTC), commented, “I welcome this bill, which provides regulatory clarity, consumer protection, and support for domestic innovation and financial inclusiveness. I am pleased to see its bipartisan support from legislators.”
It is worth noting that FIT21 also limits the role of the SEC in regulating digital assets while expanding the functions of the CFTC. Warren added, “Without FIT21, the SEC’s excessive regulation and enforcement practices will continue, and the lack of regulatory clarity will only push compliant operators and innovators overseas, causing the United States to lose its leadership role in financial innovation.”
Another important legislation passed by the House of Representatives last week is the Central Bank Digital Currency (CBDC) Anti-Surveillance Act, which has been submitted to the Senate. This bill will prevent the Federal Reserve from issuing “retail CBDC” and aims to protect the financial privacy rights of US citizens.
Giancarlo commented, “There is no doubt that the federal government should not launch a US central bank digital currency (CBDC) unless key design elements such as privacy, security, distribution, and economic stability are fully understood, democratically resolved, and consistent with the Constitution, especially when unnecessary surveillance is prohibited. The CBDC Anti-Surveillance Act rightly emphasizes the importance of financial privacy and the critical role of Congress in authorizing sovereign digital currency. However, against the backdrop of FIT21, which promotes innovation, the CBDC Anti-Surveillance Act seems to not only prohibit the Federal Reserve from issuing or providing CBDC services but also prohibits the feasibility testing of CBDC, including cooperation or coordination with the private sector.”
Jeng, founder and CEO of Digital Self Labs, agreed and added, “While the CBDC Anti-Surveillance Act is commendable in addressing privacy concerns, it may undermine the competitiveness of the United States as other countries move forward with the issuance of CBDCs.”
Overall, the past week’s results indicate that cryptocurrency and digital asset policies and regulations have been implemented in an effective and relatively balanced manner. However, uncertainties still exist. Overall, many industry professionals are encouraged by the progress made by Congress after months of apparent stagnation. But the work has just begun, and there is much more to be done. However, lawmakers in the United States may now have a little more trust in cryptocurrencies and digital assets.
In the past few months, collaboration between the public and private sectors has been crucial in driving innovation and legislation in the United States. Many policymakers and their teams, as well as industry and trade association teams in traditional financial services, cryptocurrencies, and digital assets, deserve recognition.
The industry will continue to collaborate with regulatory agencies and policymakers to develop appropriate and comprehensive regulatory frameworks for cryptocurrencies and digital assets, support responsible innovation, benefit US citizens and businesses, and create a borderless global digital ecosystem.