Yesterday, the House passed H.R. 4763, the Financial Innovation and Technology for the 21st Century (FIT21) Act, by a vote of 279-136, including 71 votes from Democrats. The bill passed despite opposition from the White House in a Statement of Administration Policy (SAP) and opposition in a statement by U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler. Brief descriptions of the bill can be found in our recent blog post and in the press release by the House Financial Services Committee announcing passage of the bill. The following is a brief analysis of expected future developments related to FIT21 prepared by BakerHostetler partner and Federal Policy team member Kevin Edgar, whose 27 years of financial services experience includes serving as chief counsel of the House Committee on Financial Services. 

• Democrats’ Support of FIT21 Was More Robust Than Expected. The 71 Democrats who voted yes for FIT21 significantly exceeded estimates of 30-50 yes votes.

• The Chances of FIT21 Becoming Law Are Low. Many bills from the House Financial Services Committee pass the House with even larger vote totals than FIT21 and still are not considered by the Senate. There is not a Senate companion bill for FIT21, and it is unlikely that the Senate will vote on the bill. The chances of any digital asset market structure bill becoming law this year are very low. A stablecoin bill is possible later this year, but the House has not reached an agreement yet over concerns about who should be the primary regulator of stablecoins, among other issues.

• The Senate Schedule Will Impede Action on FIT21. The congressional schedule is lighter this year because of the Republican National Convention in mid-July and the election. The Senate is out of session next week for the Memorial Day recess. When the Senate returns, it will be in session for 42 days before the election. When the Senate returns after the election, it will be in session for roughly five weeks.

• Senate Opposition Is Another Obstacle for FIT21. The Senate’s procedure is very different from the House’s. It takes 60 Senate votes to consider any legislation. The Senate Banking, Housing and Urban Affairs Committee has not yet considered digital assets legislation. The committee’s chairman, Sen. Sherrod Brown (D-OH), is a crypto-skeptic; if he were to consider digital asset legislation, it would likely be very narrow and probably focus on enhancing application of the Bank Secrecy Act to the digital asset industry. Senate opponents will likely leverage Gensler’s opposition as well. As the Senate Agriculture, Nutrition and Forestry Committee has jurisdiction over the Commodity Futures Trading Commission, any digital asset legislation would require collaboration between the two committees. Another possible impediment to achieving broad congressional agreement on crypto policy is the farm bill’s reauthorization in the House and Senate agriculture committees.

• The Senate’s Recent Vote Disapproving the SEC’s Staff Accounting Bulletin No. 121 (SAB-121) Is Not Indicative of a Vote on FIT21. When Democratic and Independent senators voted to disapprove SAB-121 via the Congressional Review Act, they did so over the Biden administration’s objections as it had already published a SAP indicating the president would veto the resolution, and it is unlikely that Congress could override the veto. In contrast to the administration’s SAP on SAB-121, the SAP on FIT21 does not include a veto threat. The SAP on FIT21 appears to have been carefully crafted so that the Senate opponents could use the opposition to force changes to the bill.

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