A key U.S. crypto bill heads for a vote
This Wednesday is Bitcoin Pizza Day, celebrated in honor of the first-known BTC transaction for a physical good.
There’s never a dull moment on the blockchain. Here’s what you need to know this week:
A key crypto bill is set for a House vote on Wednesday. Everything you need to know about FIT21, and what it could mean for crypto regulation in the U.S.
The history of Bitcoin Pizza Day. The story behind crypto’s cheesiest holiday.
This week in numbers. The list of firms that have invested in BTC ETFs so far, the amount of venture capital expected to flow into crypto this year, and more stats to know.
CRYPTO POLICY
Inside the bill that could shape the future of the U.S. crypto industry
Even though nearly 20% of Americans have purchased crypto, and many of the world’s most innovative crypto companies are based here, the United States lags far behind most developed economies when it comes to crypto regulation.
This week, however, Congress is finally poised to vote on a landmark piece of legislation that would create a comprehensive, federal regulatory regime for crypto in the U.S.
The Financial Innovation and Technology for the 21st Century Act (FIT21) has been hailed by cosponsor Rep. Patrick McHenry (R-N.C.) as the “culmination of years of bipartisan efforts to finally provide clarity.” And in a recent town hall meeting, Rep. Ritchie Torres (D-N.Y.) praised the bill for offering “regulatory clarity where none exists. It protects both consumers and investors.”
Among many other things, the bill would clarify questions around which agencies have the responsibility to regulate various aspects of the crypto industry, create consumer protections for the 52 million Americans who own crypto, and give web3 developers looking to launch projects in the U.S. clear rules of the road.
In advance of the vote, which is expected to take place on Wednesday, here’s what you need to know.
Why is FIT21 important?
Given the U.S. is home to both Wall Street and Silicon Valley, it’s unsurprising that it’s grown into a global crypto hub. But the chaotic regulatory picture here — especially as compared to regions including the U.K., the EU, and some parts of Asia that have made significant strides in providing clarity — means crypto companies and innovators are increasingly looking outside the U.S.
An estimated 2% of web3 developers have been leaving the U.S. annually due to potential risks around basing a digital asset project here, and around 4 million blockchain-related jobs are at risk over the next 5-to-7 years.
Coinbase supports FIT21, saying the bill “offers a strong regulatory framework providing clear definitions, consumer protections, and a path for regulation that does not stifle innovation.”
Here are some of FIT21’s major provisions:
FIT21 would clarify which agency has regulatory jurisdiction over different parts of the crypto ecosystem.
Currently, the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) both claim jurisdiction to regulate the crypto industry, and the fractured landscape makes it difficult for crypto companies to operate amid limited and confusing guidance and heavy-handed enforcement actions.
FIT21 would clarify that the CFTC has jurisdiction over digital commodities, while the SEC’s jurisdiction would be focused on digital assets offered as part of an investment contract.
How would crypto commodities and securities be defined?
In very basic terms, it comes down to decentralization. As a16z crypto’s FIT21 explainer puts it, the CFTC would regulate a digital asset as a commodity “if the blockchain, or digital ledger, on which it runs is functional and decentralized.” (Disclosure: a16z is a Coinbase investor.)
The SEC would regulate a digital asset as a security “if its associated blockchain is functional but not decentralized.”
The bill also provides a definition for decentralization, including the requirement that no individual can control the blockchain and that “no issuer or affiliated person” controls more than 20% of the project’s digital assets or voting power.
The bill would also create new consumer protections for crypto users.
The legislation helps protect consumers by requiring increased transparency and accountability from the crypto industry.
Digital-asset institutions like crypto exchanges would be required to segregate customer funds from their own, provide appropriate disclosures to customers, and reduce potential conflicts of interest through registration and operational requirements.
The bill would also require digital asset developers to provide accurate information about their project’s operations, ownership, and structure. It also requires lock-up periods for tokens issued to insiders.
Who supports this bill?
FIT21 passed out of two committees last July with bipartisan support, and is now advancing to a full House vote with supporters on both sides of the aisle.
Rep. McHenry, who chairs the House Financial Services Committee, has made passing FIT21 a top priority for 2024 during his final term in Congress before retiring. Meanwhile, a letter from eight House Democrats this week said that the bill would “promote a secure, innovative, and inclusive financial future.”
Can FIT21 pass in the House of Representatives?
Yes, it’s definitely possible. This past Thursday, another crypto-related bill (which would overturn a controversial SEC rule that makes it harder for banks to handle crypto customers) garnered support from 12 Democrats and 48 Republicans in the U.S. Senate, which has some observers hopeful that similar levels of bipartisan support are possible for FIT21.
“There’s still some big names on the Democratic side who haven’t made their thoughts known,” said Rep. Wiley Nickel (D-N.C.). “The advice I’m giving Democrats is, we cannot hand this issue to Republicans.”
What could happen next?
If FIT21 passes in the House, that alone represents a huge step forward. The bill’s next stop would be the Senate, which could approach the legislation in a variety of ways. Aside from a straightforward vote, one possible approach comes from Rep. French Hill (R-Ark.), who is in line to succeed Rep. McHenry as chair of the Financial Services Committee. Hill has suggested tying FIT21 to one of Congress’s larger spending bills before the end of the year.
The bottom line…
There aren’t many issues more important to the future of the U.S. crypto industry than regulatory clarity — and FIT21 would make major strides in that direction. If you’d like to help, you can ask your representative to vote for FIT21.
TUNE IN
A new podcast on crypto’s role in the evolution of money
The ways human beings have paid for things and stored long-term value have changed constantly over the centuries. Is cryptocurrency the next logical evolution of the monetary system?
In “Evolving Money,” a new podcast from Bloomberg Media Studios and Coinbase, longtime financial journalist Paddy Hirsch chats with financial industry leaders about why they believe crypto will soon seem as ordinary as your credit card.
Along the way, he also takes a look back at key moments in financial history where money changed for the better to help illuminate why crypto could be the next logical step in money’s adaptation.
Listen to the trailer for “Evolving Money” and subscribe now to receive the first episode this Thursday.
PIZZA PARTY
A brief history of Bitcoin Pizza Day, crypto’s cheesiest holiday
“I just wanted to report that I successfully traded 10,000 bitcoins for pizza,” wrote Florida-based programmer Laszlo Hanyecz on May 22, 2010, documenting the first-known BTC transaction for a physical good — a moment we now commemorate each year as Bitcoin Pizza Day.
What exactly happened?
Fourteen years ago, Hanyecz posted on a bitcoin forum offering 10,000 BTC (worth about $40) to anyone willing to send him pizza. A college student named Jeremy Sturdivant took him up on the deal and had two large Papa John’s pizzas delivered to Hanyecz’s house.
At the time, there weren’t any systems in place that would allow for seamless crypto transactions, so Sturdivant used cash to pay for the order. The entire deal — from the time Hanyecz posted his request until he received the pizzas — took two days.
How much would the BTC be worth today?
Just a little bit more. As of Monday, 10,000 BTC was worth about $677 million, or roughly 35 million large cheese pizzas.
Did Sturdivant hold on to the BTC?
Nope! He eventually sold it to fund a trip with his girlfriend.
Does Hanyecz regret spending that much BTC on pizza instead of HODLing?
“I don’t regret it,” he told Cointelegraph in 2018. “I think that it's great that I got to be part of the early history of Bitcoin … I’d like to think that what I did helped.”
NUMBERS TO KNOW
$12 billion
Amount of venture capital that Pitchbook expects will be invested in crypto projects this year. As noted in Bytes a few weeks ago, venture capital for crypto is very much back, with early-stage (or “Series A”) investment approaching levels last seen during the 2021 bull run, and at least $1 billion in capital having poured into startups for two consecutive months.
$948 million
Net inflows into U.S. spot bitcoin ETFs last week, marking a continued turnaround this month after April saw a series of outflows. “Last week’s inflows were an immediate response to the cooler U.S. CPI report on Wednesday,” reports the Block. Fidelity's FBTC ETF saw the largest inflows, with $344.5 million.
600
Approximate number of firms that have invested in BTC ETFs in 2024, according to SEC filings. Millennium Management leads the pack with $1.9 billion spread across several ETFs. Among major financial institutions — JPMorgan, Wells Fargo, UBS, BNP Paribas are on the list — Morgan Stanley reported the biggest investment with $269.9 million in Grayscale’s GBTC.
11.4%
Bitcoin’s three-month annualized basis on the Derebit futures exchange as of Monday. What does that mean? It means that markets are bullish — and predicting BTC will increase by at least that much in three months.
TOKEN TRIVIA
What is dollar cost averaging?
A
A gradual investment strategy that does not rely on “timing the market”
B
A method to automate crypto purchases on Coinbase
C
A way to invest any amount of money at regular intervals of time
D
All of the above
Find the answer below.
Trivia Answer
D
All of the above
