As digital assets continue to permeate our financial landscape, the need for regulatory certainty has never been more urgent.

The Financial Innovation & Technology for the 21st Century Act (“FIT 21”), which advanced in Congress last year but did not get to the finish line, represents a pivotal opportunity to provide that clarity.

FIT 21 aims to create a comprehensive federal regulatory framework for digital assets by delineating the specific regulatory duties of the U.S. Securities and Exchange Commission (“SEC”) and the U.S. Commodities Futures Trading Commission (“CFTC”).

FIT 21 categorizes digital assets by designating some of them as digital commodities, restricted digital assets, or permitted payment stablecoins. It assigns regulatory oversight of digital commodities to the CFTC and confers authority over restricted digital assets to the SEC.Permitted payment stablecoins will be subject to one of these authorities. The CFTC will have authority when the stablecoin is used for cash or spot transactions, while the SEC will reign its anti-fraud and anti-manipulation authority when brokered, traded, or custodied.

In an era where innovation drives economic growth,but is also shrouded with uncertainty, establishing a clear regulatory framework for digital currency is essential for fostering innovation, protecting consumers, and ensuring the United States remains a leader in the global crypto economy.

Once a nascent and volatile space, the crypto market has matured into a global phenomenon. Digital assets – such as cryptocurrencies and blockchain technologies – have evolved rapidly throughout the country, including Pennsylvania.

However, the regulatory climate surrounding these assets is a patchwork of inconsistent guidelines. Navigating the existing regulatory environment for crypto is akin to navigating a maze without a map. Different agencies have issued their own interpretations and guidelines, resulting in confusion and inconsistency. Entrepreneurs and investors are left to decipher which rules apply to them, sometimes abandoning promising projects.

Striking a balance between crypto growth and consumer protection is challenging, and FIT 21 addresses those obstacles. The legislation passed the U.S. House of Representatives last May, but the momentum stalled in the Senate. Future delays could result in the U.S. falling behind in the worldwide innovation race.

This legislation would empower businesses to transform without fear of government overregulation by providing clear guidelines on the classification and treatment of digital assets.
FIT 21 is essential for innovation in the United States, as it successfully clarifies the SEC’s jurisdiction over digital assets and provides an overdue framework for market participants to follow.

The Biden SEC under Chairman Gary Gensler openly opposed FIT 21 and leveraged its political influence to impede its progress in the Senate, by raising concerns among lawmakers. The Commission’s history of excessive regulation and bureaucratic obstacles within our industry renders its opinion on the Act less pertinent.

Given the SEC’s previous propensity for regulation by enforcement, a move to clearly delineate the agency’s jurisdiction over restricted digital assets and narrow its authority can significantly enhance market accessibility. Technological development within the United States has suffered as companies grapple with assessing risks in digital asset projects. This climate of apprehension, fueled by the SEC, obstructs advancement within the sector. The Act addresses this issue by minimizing time spent on risk assessment, mandating the SEC to reach a decision on a product within 60 days.

The Act delivers long-awaited clarity to market participants regarding the appropriate regulatory authority for digital assets and establishes straightforward guidelines. First, it specifies the criteria to assess whether a project qualifies as sufficiently decentralized and functional. If a project meets these criteria, it falls under the digital commodities category, requiring submission to the CFTC, with the process concluding within 60 days of submission to the SEC. Conversely, if a project does not qualify as a digital commodity, it falls under the jurisdiction of the SEC.

As digital assets evolve and expand, so do the risks associated with them, from scams to market manipulation. A clear regulatory framework can establish safeguards that protect consumers while promoting a responsible financial revolution.

Other countries are swiftly establishing rules and regulations for digital assets, attracting investment and ingenuity. FIT 21 offers a proactive approach, allowing the U.S. to maintain its competitive edge.

By embracing regulatory clarity, we can foster a vibrant ecosystem that drives technological advancement and positions the U.S. as a global hub for the evolution of digital currencies.

Regulatory certainty is not merely a bureaucratic ideal; it is a necessity for a thriving digital economy. Now is the time for bold action to shape a future where innovation flourishes within a framework of accountability and trust.