A crypto market structure bill may have “no chance” of becoming law in this Congress but will set up U.S. lawmakers for next year, according to investment bank TD Cowen.
The Financial Innovation and Technology for the 21st Century Act is teed up for a House floor vote at the end of the month. The Republican-led bill, also dubbed FIT21, takes a comprehensive approach to regulating crypto at large and shifts more responsibility to the Commodity Futures Trading Commission.
“We believe it would be a mistake to fixate on the details of this legislation. It has no chance of becoming law in this Congress,” TD Cowen Washington Research Group, led by Jaret Seiberg, wrote in a note on Monday. “Senate Banking has not done nearly enough prep work for the legislation to pass in the Senate. In addition, Democrats are far more focused on investor protections than on what is included in this bill.”
FIT21 is unlikely to pass in the Senate. Top Democrat Rep. Maxine Waters of California has opposed the bill, while Senate Banking Committee Chair Sherrod Brown, D-Ohio, has been pretty quiet on the issue.
“It would be a critical building block for Congress in 2025/26 when we expect a renewed effort to enact crypto market structure legislation. It puts House members on the record and shifts the focus to the Senate to move its own bill,” TD Cowen wrote.
Voting on the bill could also shed light on how Democrats and Republicans view critical issues such as anti-money laundering and investor protections, TD Cowen added and said they expect FIT21 to pass the full House.
FIT21
The bill was passed out of the House Financial Services Committee and the House Agriculture Committee last summer. The legislation faces more of an uphill battle than a bill to regulate stablecoins, which has seen some movement over the past year.
In an announcement that FIT21 would be getting a vote, House Financial Services Committee Chair Patrick McHenry, R-N.C., called the bill a bipartisan effort “to finally provide clarity.”
“Congress will take a historic step to provide a clear regulatory framework for digital asset markets,” McHenry said. McHenry is retiring at the end of his term in January 2025 and has been pushing to get his crypto bills across the finish line.
The bill set to be voted on is slightly different from the original version, though it mostly has technical fixes. Among the changes was adding Majority Whip Tom Emmer's Securities Clarity Act. That bill aims to clarify how digital assets are classified and would create a new definition for tokens that exist between commodities and securities.
Wild card
Former President Donald Trump has recently expressed support for crypto, though TD Cowen said it is unclear if he would continue that pro-crypto stance if he wins the presidential election later this year. During an appearance last week in front of people who had bought his NFTs, Trump said he would work to retain cryptocurrency business in the U.S.
“If crypto is moving out of the U.S. because of hostility toward crypto… well, we'll stop it. We don't want that,” Trump said. “If we're going to embrace it, we have to let them be here.”
In its note, TD Cowen said Trump could be a future “complication.”
“It is unclear if Trump would stick to this approach if he wins in November. Yet we believe he risks further polarizing crypto oversight, which may make finding a bipartisan compromise more difficult. We will be watching this closely,” the investment bank said.
