Democrat House Leadership Says Crypto Bill Vote Won't Be Whipped

House Financial Services Committee Ranking Member Maxine Waters (D-Calif.) and House Agriculture Committee Ranking Member David Scott (D-Ga.) – the leading Democrats on their respective committees – have sent an email to Democratic members of the House of Representatives saying they "strongly oppose" H.R. 4763, the Financial Innovation and Technology for the 21st Century Act (FIT21). While the House Democratic Whip is not whipping their members against the bill, Politico reported, Waters herself is soliciting no votes.

Waters and Scott say they oppose the bill because it undermines established legal precedents and creates uncertainty in the traditional securities market.

"This language undermines decades of legal precedent and case law, thereby creating uncertainty in our traditional securities market," the Democrat Whip's office wrote in an email, first obtained by Politico.

The email says that the bill provides a safe harbor in which entities can file an "intent to register" if they meet certain requirements, which, they argue, shields them from securities laws rules and regulations until the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) finalize new rules.

All of this "weakens investor protections and opens the door to fraud and market manipulation," the email said.

A "Dear Colleague" letter posted to the House Financial Services Committee's Democrats page delves deeper into the two leaders' opposition to the bill, referring to it as the "not fit for purpose act."

A numbered list said the bill would create a "pathway for 'investment contract assets' with no alternate regulator, meaning that virtually no laws or regulations would govern them."

A Democrat aide told CoinDesk lawmakers would have a briefing with the SEC on Tuesday morning.

The bill, if signed into law, would block shareholders from being able to sue publicly traded companies, preempt state regulations around digital assets, weaken fiduciary requirements and undermine capital markets, the letter said.

The email from the Democratic Whip's office also urged lawmakers to vote against H.R. 192, a bill introduced by Majority Whip Tom Emmer (R-Minn.) to block the Federal Reserve from issuing a central bank digital currency. The bill has an "overly broad definition" for CBDCs, the email said, and "raises concerns the bill could undermine the Fed's ability to conduct monetary policy."

FIT21 is supported by a coalition of digital assets organizations and companies, including Coinbase, Kraken, Andreessen Horowitz and 50 others, as it provides a regulatory framework for the digital assets industry, its supporters say, which is something the U.S. currently lacks.

The bill creates a definition for whether a digital asset is a security or a commodity, expands the CFTC's authority to register and regulate digital commodities, and requires the CFTC and SEC to jointly issue rules for assets not otherwise classified.

CORRECTION (May 22, 2024, 16:15 UTC): Clarifies that Financial Services Committee Ranking Member Waters is whipping votes against the bill.

CORRECTION (May 22, 2024, 16:22 UTC): Fixes subheading.