The House Financial Services Committee recently voted to advance the Financial Innovation and Technology (FIT) for the 21st Century Act. Congressman Ritchie Torres (D-NY), a member of the committee, said the bill will protect not only crypto users and investors, but also crypto companies, which he believes have been targeted by the U.S. Securities and Exchange Commission's (SEC) "regulation by enforcement" approach to the industry.
"The legislation regulates digital assets," Rep. Torres said during a Crypto Town Hall. "It brings regulatory clarity where none exists. It protects both consumers and investors...just as importantly, it protects crypto companies from arbitrary enforcement actions on the part of the SEC. So regulation by enforcement not only had a dreadful day in court, it also had a dreadful day in the Financial Services Committee."
Last week, the House Financial Services Committee (HFSC) held a markup of the bill, and committee members ultimately voted 35-15 to advance it, DeFi Education Fund reported. Amendments introduced during the markup included a requirement that the SEC and Commodity Futures Trading Commission (CFTC) issue joint rules describing the process through which they would delist digital assets that do not comply with securities or commodities laws or with the FIT for the 21st Century Act.
Rep. Torres criticized the SEC's "regulation by enforcement" approach to crypto in a July 18 letter to Chair Gary Gensler after a district court judge ruled that the token XRP is not a security when sold to members of the general public, according to a copy of the letter Torres shared on Twitter. "I am writing to inquire if the SEC intends to come to terms with the folly of the Commission's crusade against crypto assets in light of the latest decision by Judge Analisa Torres of the Southern District of New York," Torres said in the letter. "Needless to say, regulation by enforcement had a dreadful day in court. In a landmark legal opinion, Judge Torres resoundingly rejected the regulatory overreach of the SEC, which has been indiscriminately declaring all crypto assets, except Bitcoin, to be securities. By emphasizing the need to prove the presence of an 'investment contract,' Judge Torres's reasoning represents a return to a rigorous application of the Howey test, which has been applied sloppily by the SEC."
In June, the SEC filed lawsuits against Binance, the largest crypto exchange in the world, and Coinbase, the largest crypto exchange in the U.S., for allegedly violating securities laws, Federal Newswire previously reported. The CEOs of both companies responded to the lawsuits with statements emphasizing the lack of regulatory clarity for crypto companies in the U.S.
"We're proud to represent the industry in court to finally get some clarity around crypto rules," Coinbase CEO Brian Armstrong said in a June 6 tweet. "Instead of publishing a clear rule book, the SEC has taken a regulation by enforcement approach that is harming America. So if we need to avail ourselves of the courts to get clarity, so be it," the tweet said. He also pointed out that the "SEC and CFTC have made conflicting statements, and don't even agree on what is a security and what is a commodity."
Armstrong also recently asked his Twitter followers to contact their representatives and ask them to vote "yes" on the FIT for the 21st Century Act.
In response to the SEC's lawsuit against Binance, CEO and founder Changpeng Zhao (CZ) wrote in a blog post, "Unfortunately, the SEC’s refusal to productively engage with us is just another example of the Commission’s misguided and conscious refusal to provide much-needed clarity and guidance to the digital asset industry. Today’s action is another in a line of examples where, as with other crypto projects facing similar suits, the Commission has determined to regulate with the blunt weapons of enforcement and litigation rather than the thoughtful, nuanced approach demanded by this dynamic and complex technology."
