Rep. Hill Testifies Before Rules Committee in Support of the Financial Innovation and Technology for the 21st Century Act
FIT21 represents a landmark effort to deliver regulatory clarity and consumer protections for the digital asset ecosystem
Washington,
May 21, 2024 -
Today, Congressman French Hill, the Chairman of the Subcommittee on Digital Assets, Financial Technology and Inclusion, appeared before the House Committee on Rules to speak in support of H.R. 4763, the Financial Innovation and Technology for the 21st Century Act (FIT21) and H.R. 5403, the CBDC Anti-Surveillance State Act. The FIT for the 21st Century Act is an important step towards achieving regulatory clarity for digital assets. FIT21 provides the robust, time-tested consumer protections and regulatory certainty necessary to allow digital asset innovation to flourish in the United States.
Watch Rep. Hill’s testimony here.
Read Rep. Hill’s testimony as delivered:
“Chairman Burgess and Ranking Member McGovern, thank you for the opportunity to present the joint work of our two committees, the House Agriculture and House Financial Services Committees.
“Let me start first with H.R. 4763, the Financial Innovation and Technology for the 21st Century Act, or FIT21.
“Mr. Johnson and I were pleased to co-author this groundbreaking bill with Agriculture Chair Thompson, along with our colleagues Warren Davidson and Tom Emmer.
“In the wake of FTX’s catastrophic collapse in 2022, Financial Services Committee Chair McHenry and Ag Chair Thompson crafted a set of principles to protect consumers and establish clear rules of the road whereby good actors who want to innovate responsibly have that kind of regulatory clarity.
“Absent clear rules, we will continue to see the SEC pursue a ‘regulation by enforcement’ agenda that leaves market participants fearing that they’ll be subject to litigation at a moment’s notice if they continue to operate in the U.S.
“Who does this hurt most? Our constituents.
“FIT 21 alleviates this concern by leveraging the existing capabilities at the Securities Exchange Commission and the Commodity Futures Trading Commission.
“I’m proud to say that this bill is the product of countless bipartisan discussions between Members of the House Financial Services and Ag Committees.
“Despite this, some may argue that the SEC’s concern with the legislation should trump our work.
“Let me be clear: we incorporated a significant amount of feedback from the agencies, including the Securities Exchange Commission, as well as Members of Congress and market participants—all during the past 14 months.
“With the FTX collapse fresh in our minds, we wanted to ensure that the U.S. avoided future fraudulent activity conducted in the same manner as we witnessed with FTX.
“As such, this bill imposes strict consumer protections that do not allow commingling of customer funds.
“We included provisions to mitigate conflicts of interest. We impose capital and other necessary requirements on intermediaries. And we impose higher standards for custody.
“While market participants wait for rules to be finalized, we include an interim oversight process where entities will need to file a ‘notice of intent to register’ with the SEC and the CFTC. Thus, subjecting themselves immediately to federal regulatory oversight.
“Again, my colleague from California, the Ranking Member, may say the status quo is preferred and the SEC has all the authority it needs.
“Let’s consider the status quo for a second: We have a $2 trillion dollar industry, the majority of which is subject to very limited federal oversight.
“If the existing ad hoc process remains in place, I’m convinced we will continue to be plagued by future FTX-like situations because consumers are not afforded the careful protections crafted in this proposal.
“This bill does not create securities loopholes. This bill does not deregulate crypto.
“Quite the contrary, this framework recognizes the unique characteristics and the evolution of blockchain networks so consumers can receive similar protections they have today in traditional financial markets.
“We accomplished this by creating a fit for purpose disclosure regime where investors are regularly provided with material information about a digital asset being overseen by the SEC or the CFTC.
“Regardless of what some critics claim, this bill does not create a ‘light-touch’ regime for crypto crooks or prevent the SEC from being able to police its markets.
“We closely emulated the SEC’s current registration exemption regime for the offer and sale of certain digital assets.
“We are not reinventing the wheel, however—we are clarifying why restricted digital assets are unique from traditional securities and should be regulated differently. This follows the principle we have had from the beginning of ‘same risk, same regulation.’
“The bill also gives the SEC clear authority over these restricted digital assets that are not certified under the legislation to be considered as a digital commodity.
“However, if these digital assets do satisfy the standards set forth in our bill, then those assets could be traded as digital commodities under the watch of the CFTC.
“FIT21, Mr. Chairman, is a watershed moment for entrepreneurs and innovators and, more broadly, our country.
“Now, let me turn to highlight the importance of Whip Emmer’s H.R. 5403, the CBDC Anti-Surveillance State Act.
“This bill is very simple. It prohibits the Federal Reserve from issuing a CBDC unless it is open, permissionless, private, and fully preserves the privacy protections of cash.
“Fortunately, the U.S. Constitution expressly grants Congress the sole authority to ‘coin money, and regulate the value thereof.’
“However, vague statements from the Federal Reserve about the legal authority to issue CBDCs necessitate this legislation. We must make it completely clear that authorization must come directly from Congress.
“Claiming that a CBDC is needed for faster payments further ignores private sector innovations. CBDCs put the government in a place where they don’t belong.
“The only ‘benefit’ that a CBDC has is increased surveillance and control over Americans’ financial lives, which flies in the face of Americans’ right to privacy.
“I thank the Committee for your time, and I look forward to the discussion.”
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