a16z: Explaining the FIT21 Bill: Why Is It Beneficial for Crypto Industry Development?
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a16z: Explaining the FIT21 Bill: Why Is It Beneficial for Crypto Industry Development?
The FIT21 Act/HR 4763 establishes a regulatory framework for the digital asset market in the United States.
Navigating Web3 tides with focused insightsBy a16z
Translation: TechFlow
At the end of this month, the House of Representatives will vote on an important bill (HR 4763), and we believe you should pay attention.
Financial Innovation and Technology for the 21st Century Act, also known as the FIT21 bill, would bring much-needed clarity to U.S. crypto regulation if passed—benefiting every participant in the industry. If enacted, this bill would:
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Provide blockchain projects with a safe and effective path to launch in the United States;
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Clarify the jurisdictional boundaries between the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC)—defining which agency regulates what aspects of crypto, and whether digital assets are securities or commodities;
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Ensure oversight of cryptocurrency exchanges and further protect American consumers by establishing clear rules for crypto trading.
Below, we’ll explain why this matters so much.
What’s in the bill?
The FIT21 bill / HR 4763 establishes a regulatory framework for U.S. digital asset markets to:
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Address the unique structural characteristics of digital assets;
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Provide clear and robust consumer protections;
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Clearly define which digital assets fall under CFTC regulation and which fall under SEC regulation. This is significant because there are important legal distinctions between “commodities” and “securities,” which greatly affect how they are regulated.
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If the blockchain or digital ledger powering a digital asset is functional and decentralized, the Commodity Futures Trading Commission (CFTC) would regulate it as a commodity.
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If its underlying blockchain is functional but not decentralized, the Securities and Exchange Commission (SEC) would regulate the digital asset as a security.
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The bill defines decentralization as, among other criteria, a state where no single person has unilateral control over the blockchain or its use, and no issuer or affiliate holds 20% or more of the digital asset’s control rights or voting power.
The bill also includes additional consumer protection requirements such as segregation of customer funds; lock-up periods for token insiders (to incentivize innovation over pure speculation); annual sales limits; and disclosure obligations.
These safeguards resemble those implemented by regulators after the Great Depression—following excessive speculation in the 1920s and the 1929 stock market crash. Once established, these rules helped usher in an era of unprecedented market growth and innovation in the U.S.
What’s not in the bill?
Some in the industry worry that the bill gives the SEC too much authority, due to the high bar it sets for decentralization and its ability to reclaim jurisdiction over any re-centralized tokens or projects. Others are concerned that the bill does not clearly delineate jurisdictional boundaries between the SEC and CFTC.
Nevertheless, while imperfect, this bill would provide the regulatory certainty the crypto industry needs to continue operating and innovating in the United States.
Some may ask: why have regulation at all? But the absence of regulation is unrealistic. Clearer rules are better than chaotic ones. Regulation—and clear pathways for compliance—enable innovators to build trust with the public, deliver valuable products, and hold bad actors accountable.
Who’s behind it?
The FIT21 bill is a joint effort between the House Committee on Financial Services (which oversees the SEC) and the House Agriculture Committee (which oversees the CFTC), and has broad industry support. Last July, the Financial Services Committee passed the bill with support from six Democrats and all Republicans on the committee, while the Agriculture Committee advanced it by unanimous consent. Since then, the bill has enjoyed bipartisan backing.
Why now, and what can you do to help?
The vote on this bill is expected within the coming weeks—it will be a de facto referendum on crypto in America.
Ensuring strong bipartisan passage is critical. After that, the bill must still pass the Senate and be signed into law by the President. We are therefore at a pivotal moment. To do your part, we urge you to contact your local representative via Stand with Crypto's website.
Why does this matter?
Despite over a decade of existence, the U.S. still lacks a comprehensive regulatory framework for digital assets. The current environment is fragmented, incomplete, and unclear. This regulatory uncertainty creates a confusing landscape for innovation while providing fertile ground for bad actors. As we’ve seen, companies and individuals with ill intent can easily launch products that exploit regulatory gaps.
Meanwhile, responsible actors—legitimate entrepreneurs and startups—face questionable “regulation by enforcement.” This approach harms U.S. innovation, especially as other countries advance rapidly, undermines the long-term dominance of the U.S. dollar, disadvantages American consumers, and weakens overall economic competitiveness.
When other jurisdictions offer sound regulatory regimes, startup activity tends to move overseas. This is not an abstract concern: startups create jobs, generate economic value, and may grow into the next major tech giants. For example, Amazon, Apple, Facebook, Google, Microsoft, Netflix, Nvidia, and Salesforce were all founded in the U.S., some within just the past 20 years. Today, they dominate market capitalization and profoundly shape our daily lives. By fostering an innovation-friendly environment, the FIT21 bill enables the crypto industry to reach similar potential, while avoiding the pitfalls of a market dominated by a few large tech gatekeepers.
Regardless of your views on crypto today, it represents far more than a financial opportunity. Itsignals a transformative shift in technology platforms—just as personal computers, mobile phones, and the internet reshaped our world. While the internet is one of humanity’s most important technological innovations, it is increasingly failing today’s consumers, creators, and developers. Blockchain, crypto, and Web3 can address these shortcomings in multiple ways: from proof-of-authenticity tools against deepfakes and identity verification for AI, to greater voice and choice in social media platforms, and more inclusive payment systems. But we need a supportive environment for these innovations to thrive in the United States.
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