The crypto industry has been calling out for regulatory clarity for years, fought tooth and nail for regulation, and seemed to only keep hitting a wall that is the Securities and Exchange Commission and its head Gary Gensler. However, in the past week, the sentiment toward crypto in D.C. has shifted, with the movement of major pieces of legislation and an about face at the SEC.

Yesterday, the House of Representatives passed the Financial Innovation and Technology for the 21st Century Act (FIT21). This market structure bill is the first step in providing regulatory protections necessary to allow digital asset innovation to thrive in the U.S. 

This followed the Senate last week passing a measure to overturn a SEC bulletin that establishes certain accounting standards for firms that custody crypto. The Staff Accounting Bulletin (SAB 121), which went into effect in 2022, created concern over the scope and application of the SEC’s actions. Chairman of the House Financial Services Committee and staunch crypto ally, Chairman McHenry, said SAB 121 was one of the most glaring examples of regulatory overreach by the SEC. 

The spot Ether ETF conversation has also picked up this week, and hit a crescendo yesterday when the SEC approved several exchange applications to list the investment products. 

Leading industry voices on the ground in D.C. spoke with Decential about the recent regulatory movements. 

George Leonardo, Capitol Hill Crypto 

According to Leonardo, who writes the popular newsletter Capitol Hill Crypto, the House and Senate floor votes on repealing SAB 121 gave the industry the chance to show Congress and the White House how motivated they are to support pro-crypto politicians and policies.

“Recent votes have also spurred pro-crypto Democrats, like Rep. Wiley Nickel (D-NC), for example, to become more vocal about not conceding the crypto issue to Republicans,” Leonardo said. 

“These events, combined with recent polling suggesting that the crypto voter will not be an insignificant faction in swing states this November, may have helped move the needle with some policymakers in DC who were previously hesitant to support crypto-related policies.” 

He said what was surprising about FIT21 wasn’t just the total number of Democrats who voted yes (71), but also that the votes included key leaders within the Democratic party, including Speaker Emerita Nancy Pelosi and Democratic Whip Katherine Clark. 

Although there’s a short legislative calendar remaining, as Congress will be out of session often so members can hit the campaign trail, Leonardo is optimistic we might see a bipartisan deal on stablecoin legislation and a legislative fix to digital asset broker tax reporting requirements, as both issues have bicameral, bipartisan interest. 

“In addition, Chair McHenry has made clear he is highly motivated to pass legislation, especially stablecoin legislation, before he retires from Congress at the end of this term,” Leonardo said. “Whatever doesn't get enacted this year will still likely serve as a foundation for crypto policy negotiations going forward.”

Ji Kim, Crypto Council for Innovation 

The chief legal & policy officer at Crypto Council for Innovation said tech is a nonpartisan issue in the U.S., and the bipartisan repeal of SAB121 as well as Democrats voting in favor of FIT 21 further underscore this point.

“All of the recent events and developments reflect that members of Congress are further realizing that digital assets are absolutely here to stay,” Kim said. 

“We have seen other leading jurisdictions acting as first movers to develop regulatory frameworks, and it is critical that we have that here in the U.S. - a comprehensive regulatory framework that protects American consumers and investors, drives growth, fosters financial inclusion, and mitigates risks to national security. FIT 21 accomplishes this.” 

Kristin Smith, Blockchain Association  

The Blockchain Association CEO said the House passage of FIT21 represents a watershed moment and badge of Congressional validation for the crypto industry in the United States. 

“This week’s overwhelmingly bipartisan passage of FIT21 was symbolic – it shows that both parties are willing to come together and that Congress – not the SEC – should make policy,” Smith said. 

“It shows that the political winds are shifting in Washington. The crypto industry is more organized than ever before – and we now have all of the pieces in place to advocate for smart policy,” she said.