House Democrats Not Whipped Against Pro-Crypto Bills, Yet Urged to Oppose

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Democrats in the United States House of Representatives will not be forced to vote against two pro-crypto bills expected to come up for a floor vote this week, although party leaders are strongly urging them to do so. 

According to an email sent on May 20 by the Democrats to House members, shared by POLITICO, the party did not explicitly direct members to vote no on the Republican-led Financial Innovation and Technology for the 21st Century (FIT21) Act and the CBDC Anti-Surveillance State Act—H.R. 4763 and H.R. 5403, respectively.

Democrats Urged to Pass FIT21

These bills have been seen as favorable for the cryptocurrency industry if passed. The FIT21 Act aims to clarify the classification of cryptocurrencies as either commodities or securities, primarily assigning regulatory control of the sector to the Commodity Futures Trading Commission (CFTC). 

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The U.S. crypto industry and lobbyists have shown strong support for this bill, with 60 companies urging the House to pass it in a letter dated May 16.

Prevention of CBDC in the US

On the other hand, the CBDC Anti-Surveillance State Act seeks to prevent the Federal Reserve from issuing a Central Bank Digital Currency (CBDC). However, the email from the Democrats noted that Representatives Maxine Waters and David Scott “strongly oppose” the FIT21 Act, with Waters also opposing the CBDC Act.

POLITICO obtained a letter from Waters and Scott urging a vote against the FIT21 Act. POLITICO reporter Eleanor Mueller shared on X that “House Democratic leaders said today they will NOT whip against House Republicans’ crypto bill, I’m told,” referring to FIT21.

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Democrats Express Concerns Regarding FIT21

In their email, the Democrats expressed concerns with parts of the FIT21 bill, particularly its provision for trading digital commodities in the secondary market if they were initially offered as part of investment contract securities as defined by the Securities Exchange Commission (SEC) using the Howey test. The email stated, 

“This language undermines decades of legal precedent and case law, thereby creating uncertainty in our traditional securities market.”

The leaders also argued that the bill “weakens investor protections and opens the door to fraud and market manipulation” by providing a “safe harbor” where some entities can lodge an intent to register, effectively shielding them from the SEC until both the SEC and the CFTC finalize crypto rules.

Halting Fed from Issuing CBDC

Meanwhile, the CBDC Anti-Surveillance State Act would halt the Federal Reserve from issuing a CBDC, including in pilot programs. Democrats contended that stopping CBDCs would impair the “primacy of the U.S. dollar” as other countries moving forward with their own CBDCs aim to evade sanctions.

The email further stated, “According to the Congressional Budget Office (CBO), the bill’s overly broad definition of CBDC raises concerns the bill could undermine the Fed’s ability to conduct monetary policy,” particularly as the Federal Reserve attempts to navigate a soft landing concerning inflation.

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