What is the FIT21 Act?
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, also known as FIT21. This bill has far-reaching implications for 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 businesses in their development process but also provides opportunities for bad actors.
In this context, the United States has proposed the FIT21 Act, aiming to establish a comprehensive regulatory framework that clarifies the regulatory responsibilities of cryptocurrencies, especially in terms of commodities and securities. Most importantly, when regulations are well-defined, there is an opportunity for professionals in the United States to establish the country’s position in the cryptocurrency industry.
Why is the FIT21 Act important?
The FIT21 Act 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 Act is passed, it will provide a clearer understanding of which digital assets are regulated by the Commodity Futures Trading Commission (CFTC) and which are regulated by the US Securities and Exchange Commission (SEC). This is important because there are significant differences in the definitions of “commodity” and “security,” which affect the current regulatory approach.
If the blockchain or digital ledger being used today is “functional and decentralized,” the CFTC will regulate digital assets as commodities. If the blockchain-related project is “functional but not decentralized,” the SEC will regulate digital assets as securities.
This clear distinction will help startups and investors better understand their legal rights and obligations, reduce regulatory uncertainties, and promote innovation and development.
Definition of decentralization in the Act: No one has unilateral control over the blockchain or its usage, and issuers or related parties do not control more than 20% of the digital assets or voting rights.
Additionally, the Act 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 restrictions, and project disclosure requirements.
Once these regulatory framework provisions are in place, the United States is likely to experience unprecedented growth and innovation in the blockchain market and economy.
What does a16z think of this Act?
Of course, this Act is not perfect. Many industry insiders are concerned that the FIT21 Act will create high barriers to decentralization or give excessive jurisdiction to the SEC.
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. Regulatory clarity and compliance standards also enable innovators to build trust with the public and provide useful products, while holding bad actors more accountable.
a16z emphasizes that the cryptocurrency industry has been around for over a decade, but the United States still lacks a comprehensive digital asset regulatory framework. The current regulatory framework is fragmented, incomplete, and lacks clarity, creating an environment of regulatory uncertainty and becoming a breeding ground for bad actors. Meanwhile, legitimate entrepreneurs and startups have been constrained by uncertain enforcement regulations.
In this situation, when other jurisdictions offer 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 surrounding the FIT21 Act, it does provide the much-needed regulatory clarity for the cryptocurrency industry. This is crucial for the continued operation and innovation of the industry as a whole. The next few weeks will see a vote 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.
