FIT21: A New Era of Digital Asset Regulation in the US

House Republicans on May 5, 2025, released a legislative discussion draft of the Financial Innovation and Technology for the 21st century Act (FIT21). The bill, which is being drafted with the joint leadership of the House Financial Services Committee and House Agriculture Committee, aims to create new legislation governing bitcoin exchanges in the U.S. It seeks to forge a regulated structure for digital assets while resolving long-standing regulatory ambiguities.

The draft, which is an amendment to the previous version of FIT21 passed by the House in 2024, brings forth major changes in the landscape of cryptocurrency governance. It classifies digital assets on the basis of functionality and decentralization. The assets that would be considered decentralized by the Commodity Futures Trading Commission (CFTC) can be labeled digital commodities, which are governed by the CFTC; the assets that will still be considered centralized, however, will be coming under the ambit of the Securities and Exchange Commission (SEC) as restricted or unregistered assets.

The new legislation will place the primary responsibility for registering and regulating bitcoin exchanges on the Commodity Futures Trading Commission (CFTC). It is also expected to streamline the process for registering digital asset trading platforms with 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.

Crypto Oversight Key Updates in FIT21

The updated draft of FIT21 builds on a clean division of responsibilities between the SEC and CFTC.

It also tightens rules governing affiliate sales in an attempt to avoid such insider control and ownership. Every six months, projects will 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 with the CFTC.

The draft legislation marks a significant step towards providing much-needed clarity on the regulatory status of bitcoin exchanges in the U.S. It is still early stages, and the bill is expected to face scrutiny from both industry stakeholders and consumer advocates.

The updated draft of FIT21 includes several key changes from the previous version of the bill, which was passed by the House in 2024. Most notably, the bill no longer requires the SEC to certify the decentralization status of crypto tokens. Instead, this task will be assigned to a newly created body, which will be responsible for developing and maintaining a regime for determining and certifying the decentralized nature of a network on a permanent basis.

This new regime, which will be known as ‘mature blockchain,’ will be tasked with creating a set of criteria that must be met by a crypto network in order to be deemed decentralized. The criteria could include factors such as the number of nodes on the network, the level of community participation in decision-making, and the purpose and use case of the network.

Once a network has met the criteria set by the mature blockchain body, it will be placed on a list maintained by the CFTC. Tokens sold on a network that appears on the list will be classified as digital commodities by the CFTC, while any remaining tokens will fall under the SEC’s jurisdiction as restricted or unregistered assets.

In addition to the changes in cryptocurrency regulation, the updated draft of FIT21 also includes several new provisions related to stablecoins and custody providers. The bill requires stablecoins to maintain higher reserve mandates and enforces clearer disclosures. These rules are meant to mitigate the risk of runs on stablecoin issuers and to promote greater transparency in the stablecoin industry.

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 by industry insiders as a first step away from the “regulation by enforcement” that has been widely criticized by members of the crypto industry. It remains to be seen whether the bill will be able to gain the necessary support in the Senate to be passed into law.

The full text of the bill is available on the House Financial Services Committee website here. For more information about the CFTC’s role in digital asset regulation, please visit the CFTC’s official site.