#USHouseMarketStructureDraft

The US House of Representatives has achieved notable advancements in clarifying digital commodity transactions with the enactment of the Financial Innovation and Technology for the 21st Century Act (FIT21). Here’s a summary of the key points ¹:

Digital Asset Categories

FIT21 defines three categories of digital assets, determining their regulatory oversight by either the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC):

- *Restricted Digital Assets*: Governed by SEC jurisdiction, usually those with limited decentralization and functionality.

- *Digital Commodities*: Governed by CFTC jurisdiction, noted for their decentralization and functionality.

- *Permitted Payment Stablecoins*: Subject to either SEC or CFTC jurisdiction, depending on the nature of the transaction.

Regulatory Framework

The legislation clarifies the regulatory duties of the SEC and CFTC, offering guidance on:

- *Digital Asset Intermediaries*: Registration requirements for trading, clearing, and custody services.

- *Self-Certification Process*: Permits digital assets to be recognized as commodities, transferring regulatory oversight from SEC to CFTC.

Key Provisions

- *Consumer Protection*: FIT21 seeks to enhance consumer protection by providing clear regulatory protocols.

- *Decentralized Finance (DeFi)*: The legislation offers a safe harbor for DeFi operations, exempting certain participants from compliance.

- *Joint Committee*: Creates a CFTC-SEC Joint Advisory Committee to give recommendations on digital asset regulations.

Next Steps

Though FIT21 has successfully passed in the House, its prospects in the Senate remain unclear, with the administration voicing concerns regarding consumer protection and investor safety. If enacted, FIT21 would represent a significant advancement towards a comprehensive digital asset framework in the US.