- FIT21 separates, CFTC decentralized, SEC centralized.
- “Mature blockchain” regime replaces SEC decentralization certification.
- Projects must disclose tokenomics, ownership, and governance biannually.
House Republicans on May 5, 2025, offered a legislative discussion draft called the Financial Innovation and Technology for the 21st century Act (FIT21). This bill aims to create new legislation governing bitcoin exchanges in the US. Through joint leadership from the House Financial Services Committee and House Agriculture Committee the bill pushes for a regulated structure of digital assets while solving enduring regulatory ambiguities about digital assets.
The draft further amends the previous version of FIT21 passed by the House in 2024, and brings major changes to the landscape of governance of digital assets, such as Bitcoin and altcoins, as well as exchanges. The bill seeks to strike a balance between innovation and consumer protection by explaining the role of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).
Crypto Oversight Key Updates in FIT21
But the updated FIT21 bill is built around a clean division of responsibilities between the SEC and CFTC. On the basis of functionality and decentralization, the digital assets will be classified. The assets that would be considered decentralized by the CFTC can be labeled digital commodities, in which case they are governed by the CFTC; the assets that will still be considered centralized, however, will stay under the jurisdiction of the SEC as restricted or unregistered assets.
The most noticeable change from the prior bill is the replacement of the SEC’s function in certifying decentralization. Rather, a process will be put in place for determining and maintaining the decentralized nature of a network on a permanent basis via a new regime, ‘mature blockchain’. This represents a shift towards a more dynamic and pragmatic means of regulation, expecting that tokens will become commodities when they satisfy decentralization requirements.
It also tightens rules governing affiliate sales in an attempt to avoid such insider control and ownership. Every six months, projects need to disclose important information, like tokenomics, names of token holders, network development, and governance structures. The requirements are those of transparency that parallel public company reporting but are tailored for the Web3 space to induce accountability in lieu of stifling innovation.
This will streamline the registration process for exchanges to operate as Digital Commodity Platforms under the CFTC. This agreement provides legal certainty that platforms can list decentralized assets without the fear of SEC enforcement. Moreover, decentralized finance (DeFi) protocols with no central control may be untethered from registration with exchanges, which is great news for open source developers.
Digital Assets and Market Stability Implications
The bill gives projects a clear path for decentralization, and how tokens can ‘graduate’ out of SEC oversight into CFTC jurisdiction. A project must have no controlling party, hold under 20% of insiders and demonstrate true network utility to qualify. Regulators will be required to respond within 60 days to certifying projects as decentralized, giving them much needed certainty.
Protections will apply also to secondary market trading under FIT21. Trading platforms will treat tokens that evolve into decentralized assets as commodities and reduce legal risks for them. It also ensures the future of secondary markets, which was a significant pain for the industry.
The bill requires stablecoins and custody providers to meet higher reserve mandates and clearer disclosures. These rules are meant to ban opaque operations while promoting innovation in the stablecoin space. Additionally, the legislation exempts non custodial DeFi protocols who do not exercise discretion over user funds from the same regulatory onus that may be placed on centralized platforms.
The draft of FIT21 has been hailed as a first step away from the “regulation by enforcement” that has thwarted US crypto innovation. The bill could serve as a framework that both provides regulatory clarity and encourages technological advancement for the U.S. to take a rule in the digital asset market. The full text of the bill is available on the House Financial Services Committee website for further details. On the CFTC’s official site, you can gain some additional insights into the CFTC’s role in digital asset regulation.
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