Trump Pledges to Sign Crypto Bill

The primary piece of legislation is the Financial Innovation and Technology for the 21st Century Act, or FIT21. This bill, which passed the House of Representatives in May 2024 with bipartisan support, aims to create a clear regulatory framework by dividing oversight of digital assets between the SEC and the Commodity Futures Trading Commission (CFTC). FIT21 would grant the CFTC authority over digital assets classified as commodities, which applies if the blockchain they operate on is functional and decentralized. The SEC, in turn, would regulate assets on blockchains that are not yet decentralized, treating them as securities. This distinction is intended to resolve the long-standing ambiguity that has led to "regulation by enforcement," a practice criticized by many in the industry. For banking and fintech, the bill seeks to enable broader participation in digital asset activities. Key provisions would require digital asset exchanges to segregate customer funds and provide detailed disclosures to consumers about project ownership and structure, mirroring traditional financial regulations. The legislation also aims to establish clear rules for stablecoin issuers, requiring them to maintain 1:1 reserves and obtain federal or state charters. This legislative push represents a significant shift from the Biden administration's more cautious approach, which focused on studying risks and exploring a potential central bank digital currency (CBDC). Trump's stance aligns with a pro-crypto policy shift, including a January 2025 executive order aimed at strengthening U.S. leadership in digital finance and revoking the previous administration's more restrictive framework. The proposed framework has significant implications for payment infrastructure. While instant payment rails like FedNow and the RTP network currently handle domestic transactions, they lack cross-border capabilities. Regulated stablecoins and tokenized assets, operating on blockchain infrastructure, could offer a path for faster and cheaper global payments, creating new synergies and potential competition with existing real-time payment systems. Passage of a market structure bill is seen as a critical step for unlocking further institutional investment. Many large financial players have been hesitant to enter the digital asset space due to regulatory uncertainty. By establishing clear rules of the road, the legislation aims to create a safer environment for banks, asset managers, and other institutions to offer crypto custody, trading, and other services. However, the bill's future in the Senate remains uncertain. Disagreements persist, particularly between the banking and crypto industries, over issues like whether stablecoin holders should earn interest, which banks argue could lead to deposit flight from traditional institutions. Former House Financial Services Chairman Patrick McHenry has been a key proponent, suggesting lawmakers are eager to get a bill to the president's desk.