Four Reasons Why Democrats Should Support The “FIT21” Crypto Bill

Bill expands digital asset access, increases federal regulation, protects national security

Over the last 40 years, innovations including computers, ATMs, and mobile banking, have revolutionized personal finance, helping to dramatically reduce the rate of unbanked households in the US.

Now another wave of innovation is challenging Wall Street and offering consumers a new set of financial tools: digital assets.

With cryptocurrency adoption growing in the US, Congress is considering the Financial Innovation and Technology for the 21st Century (FIT 21) Act — legislation that provides a legal framework for digital asset innovation and consumer safeguards.

As the bill heads to a vote this week, it’s worth exploring how digital assets and FIT21’s consumer protections are a win for financial access, vulnerable communities, and the policymakers dedicated to building a better, more inclusive, more secure financial system.

Here are four ways FIT21 helps achieve progressive goals.

1. It helps more consumers use digital assets safely

Wall Street has a history of serving the most privileged Americans while excluding households with the fewest resources. By reducing costs for consumers and lowering barriers to entry, technology has a history of reversing that trend.

Take stock ownership as an example. In 1980, just 13.9 percent of households in the U.S. owned a piece of the stock market. Then came personal computers.

Over the next two decades, computers enabled the web-based buying and selling of financial securities as well as the digital execution of trades, reducing the cost of purchasing a stock. As brokerages were forced to compete, their fees dropped dramatically. These digital changes, combined with the creation of mutual funds and 401ks, sent stock ownership skyrocketing.

As innovation in blockchain and cryptocurrency takes off, these new technologies offer to similarly expand access to financial opportunities and services previously unavailable or too expensive for most Americans.

Consider the case of remittances — an important tool for many first-generation immigrants and migrant workers who send earnings home to family abroad. Under the traditional banking system, remittances are inefficient and expensive, subject to massive fees, long processing times, and geographic limitations.

Digital assets on the other hand can transfer internationally seven days a week, with transactions settled in minutes rather than days. They also can be accessed from around the world, without the need for the same traditional banking infrastructure.

Similar to the impact of online trading on traditional brokerage firms, digital assets have forced Wall Street to rethink how they offer remittances in order to compete. Over the last decade, big banks have poured money into instant money transfer technology and the Fed has developed its own instant payment system. However, banks have been slow to roll out these products for customers.

With remittances projected to grow by an eye-popping 50 percent by 2030, the need for faster, cheaper transfers is here. If the digital age has taught us anything, it’s that the way to move old institutions to action is by enabling new online competitors to do the job better. In this case, FIT21 creates a legal framework that will enable more consumers to engage safely in digital asset transactions, whether that’s here in the U.S. or abroad.

2. It provides important protections for communities in need

Black and Hispanic communities have historically been turned away from traditional financial institutions with higher mortgage denial rates and banking fees than their White counterparts. But with digital assets, these communities have found access to financial opportunities.

According to Pew Research Center polls in 2021 and 2022, some 20 percent of Black, Hispanic, and Asian U.S. adults have bought, traded, or used cryptocurrency, compared with 13 percent of white adults. Research examining the data from Pew finds that Black investors are more likely to own crypto than stocks or mutual funds.

Recently, digital assets have also emerged as one of the most popular asset classes for women, second only to cash.

For these investors, who already own digital assets, FIT21 implements critical regulations to protect consumers from fraud and cybercrime. The legislation also helps establish guidelines to reduce ambiguity and help consumers understand their rights and the risks involved with cryptocurrency.

FIT21 closes an important regulatory gap between the CFTC and SEC, which provides greater clarity and transparency for consumers in the cryptocurrency market.

Most importantly, the consumer protections laid out in FIT21 will help contribute to the long-term stability of the cryptocurrency market, which benefits ALL consumers, including those of color, facilitating a safer investment environment.

3. It expands the government’s role protecting consumers using digital assets

Current securities laws and regulations do not account for the complexities of digital assets. FIT21 expands the authority of the CFTC and SEC, giving them joint oversight over all digital assets, allowing them to issue joint rulemakings, and ensuring market safety and investor protection.

HR 4763 also gives the SEC clear authority over certain digital assets that do not meet the requirements to be regulated by the CFTC. This gives the SEC a chance to allocate its limited resources to hold digital assets in its jurisdiction accountable. Additionally, the CFTC will receive an increase in funding to adequately monitor and regulate the digital assets industry.

HR 4763 also requires the Government Accountability Office to conduct studies on the development of emerging technology in digital assets, like non-fungible tokens (NFTs) and directs the CFTC and SEC to study the impact of digital assets on markets and investors through codified FinTech programs and Joint Advisory Committees.

Given that 16 percent of Americans have invested, traded, or used cryptocurrency, the digital asset industry will continue to attract American investors for years to come. HR 4763 provides much-needed consumer protection by filling the regulatory gaps between the SEC and CFTC, creating accountability for digital asset companies through registration and disclosures, requiring companies to establish policies to mitigate potential conflicts of interest, and giving regulators increased power over bad actors.

4. It protects America’s national security and ensures US oversight of crypto

By enhancing oversight of digital assets through the CFTC and SEC, HR 4763 ensures all digital assets will be subjected to transparency and compliance metrics that would deter illicit financing, money laundering, and other financial crimes. The ability of regulators to issue clear rules for the digital asset industry will prevent threats to our financial system and keep digital asset companies from relocating abroad to countries with fewer rules.

There are good national security reasons to keep the industry under the federal government’s watchful eye. For example, after Vladimir Putin ordered an invasion of Ukraine last year, the U.S. government released economic sanctions against Russia that included instructions for American digital asset exchanges to block Russian users from handling currency through their services.

While U.S.-based digital asset exchanges abided by our sanctions, international exchanges like Binance refused, continuing to serve Russian users and creating a potential loophole for Russian actors to finance war operations through their markets. Throwing away our jurisdiction over an emerging global financial industry, no matter its flaws, would jeopardize America’s influence on the world stage.

We need strong, clear federal rules and oversight over the digital assets industry that embrace innovation while protecting consumers and the integrity of markets. A cross section of House Democrats have already recognized that this FIT21 provides an effective and needed regulatory framework for digital assets, and I hope to see more Democrats supporting the bill when it comes up for a vote.

Chamber of Progress (progresschamber.org) is a center-left tech industry association promoting technology’s progressive future. We work to ensure that all people benefit from technological leaps, and that the tech industry operates responsibly and fairly.

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