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The White House has rejected one of the largest in history U.S policies on financial technology even after the House of Representatives voted 279 – 136. But it was’nt White House that didn’t like the bill, the Securities and Exchanges Comission (SEC) and a few Democrats who refused to cross the other side may have found solid ground to oppose the FIT 21 or the Financial Innovation and Technology for the 21st Century Act.

Related: Senate’s Crypto Policy Causes Friction as Biden Contemplates a Veto

What makes this bill mostly popular with the cryptocurrency community is its proposition to avoid regulating some digital assets as securities. However, the White House feels the bill is inadequate in addressing balanced compliance requirements for digital assets. Nonetheless, officials have confirmed they will work hand in hand with Congress to promote responsible development of cryptocurrencies, decentralized finance, innovations across payment and reinstating the United States as a force to recorn in the global financial  system. 

According to White House officials, the current bill has several flaws that need reworking to make it self-sufficient in protecting investments. But the good thing remains the bill is yet to be heard in the Senate, and therefore, there is more time rework and come up with dead-end fixes. Below are some of the flaws that officials from the Biden administration pointed out: 

Shortcomings of the Financial Innovation and Technology for the 21st Century Act

The new bill intends to come up with two seperate regulations for digital asset: digital commodities which will be under the CFTC, and digital assets which will fall under the SEC. This bill says that a commodity will only qualify as digital if it has some degree of decentralization. This decentralization means the issuer is not controlling a significant amount of influence on the network (20% in this case). 

According to the SEC, FIT 21 will oversee restricted digital assets which either the investors can partake but not by investing more than 10% of the team’s income/assets. As per the bill, restricted digital assets regulations will involve token offerings that have  raised not more than $75 million.

There is also a divide between the CFTC and the SEC, like a divorcing couple deciding who gets which child on weekends. 

To be classified as a digital commodity, the issuer must notify the SEC that their asset is decentralized.

The SEC then has 60 days to respond, presumably while enjoying a nice cup of tea

SEC Chair Gary Gensler critiqued the Bill today by pointing out that there are just a smattering of digital assets out there—no more than a couple of thousand, give or take a few hundred. Should this army of token issuers all declare themselves overlords of decentralization, the SEC would be as overwhelmed as a one-man band in a symphony, meaning these assets would automatically earn their digital commodity badge without further ado.

This might be a tad inconvenient since digital commodities are free from the pesky burden of reporting, unlike  digital asset who must spill their financial guts twice a year. And really, if a decentralized protocol can muster the coordination for governance, why on earth can’t it handle a bit of disclosure? It’s not like they’re trying to keep secrets or anything.

Congresswoman Maxine Waters didn’t hold back in her critique

Waters pointed out  the CFTC was never meant to play babysitter for retail investors. With its skeletal crew of 700 compared to the SEC’s bustling army of 5,000, can the CFTC really handle the job? 

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One really has to wonder if the CFTC has the milleage to supervise a game of hopscotch, let alone digital assets. Besides, once a digital asset earns its digital commodity badge, oversight magically shrinks to the size of a 128-KB memory card.

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