A leaked email has revealed that Democratic Party leaders strongly oppose two Republican-led crypto bills. However, despite their stance, they have refrained from enforcing a unified party vote against the bills.
According to a recent revelation, members of the Democratic Party in the United States House of Representatives will not be obliged to cast their votes against two pro-crypto bills anticipated to be put to a floor vote in the upcoming days, despite the strong opposition from the party leadership.
A recently disclosed email from Democratic Party leaders to House members, shared by Politico on May 20, reveals that the party refrained from instructing its members to vote against two Republican Party-led bills: the Financial Innovation and Technology for the 21st Century (FIT21) Act and the CBDC Anti-Surveillance State Act, designated as H.R. 4763 and H.R. 5403, respectively.
Observers generally agree that the passage of both the FIT21 Act and the CBDC Anti-Surveillance State Act would positively impact the crypto industry.
FIT21 aims to strengthen the criteria for distinguishing whether a cryptocurrency is a commodity or a security and largely transfer regulatory authority over the sector to the U.S. Commodity Futures Trading Commission (CFTC).
The FIT21 Act has garnered substantial support from the U.S. crypto industry and lobbyists, as evidenced by a collective effort involving 60 companies that issued a joint letter on May 16, urging the House to pass the bill.
In contrast, the CBDC Anti-Surveillance State Act primarily focuses on restricting the Federal Reserve’s ability to issue a central bank digital currency (CBDC).
According to the email, Representatives Maxine Waters and David Scott are firmly against FIT21, with Waters also opposing the CBDC act.
Subsequently, Politico acquired a letter from Representatives Maxine Waters and David Scott, in which they strongly urged a vote against the FIT21 Act.
“House Democratic leaders said today they will NOT whip against House Republicans’ crypto bill, I’m told,” Politico reporter Eleanor Mueller wrote on X, referring to FIT21.
The email obtained by Politico highlights the concerns raised by Democratic Party leaders regarding specific provisions within the FIT21 Act. Among these concerns is the establishment of a process for trading digital commodities in the secondary market, under the condition that they were initially offered as part of investment contract securities, as defined by the Securities and Exchange Commission (SEC) utilizing the Howey test.
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In the email, the Democratic Party leaders further contend that the FIT21 Act could potentially undermine investor protections and create vulnerabilities to fraud and market manipulation. This concern arises from the bill’s provision of a “safe harbor” for certain entities, allowing them to lodge an intent to register and, in effect, shielding them from the Securities and Exchange Commission’s (SEC) oversight until the SEC and the Commodity Futures Trading Commission (CFTC) finalize new rules governing the cryptocurrency sector.
The CBDC Anti-Surveillance State Act, on the other hand, serves a different purpose altogether. This legislation is specifically designed to restrict the Federal Reserve’s authority to issue a central bank digital currency (CBDC), encompassing not only the final issuance but also any pilot programs related to CBDC development.
“This language undermines decades of legal precedent and case law, thereby creating uncertainty in our traditional securities market,” the email said.
Democratic Party leaders have expressed their concerns about the potential implications of halting the development and issuance of central bank digital currencies (CBDCs) in the United States.
They argue that such a move could undermine the preeminence of the U.S. dollar, particularly because other nations seeking to circumvent sanctions are actively pursuing the development of their CBDCs.
“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,” the email said. “Particularly concerning as it attempts to navigate a soft landing regarding inflation.”
According to Politico’s Mueller, the Financial Innovation and Technology for the 21st Century (FIT21) Act is slated for a floor debate and potential passage on Wednesday, May 22.
