FOR IMMEDIATE RELEASE

May 21, 2024

CONTACT
Carter Doughtery
carter@ourfinancialsecurity.org

House Crypto Bill Faces Broad Opposition from Public Interest Voices
Labor unions, consumer and investor protection organizations and other groups raise alarm

Washington, DC – As the House meets this Wednesday to vote on a bill that would create a new federal framework for crypto regulation, labor unions, consumer and investor protection organizations and experts are raising the alarm about the bill’s potential to cause serious consumer and investor harm.

Americans for Financial Reform and Demand Progress joined more than 30 national and state organizations and academic scholars and thought leaders with financial regulatory expertise in sending a letter to Congress expressing opposition to H.R. 4763, The Financial Innovation and Technology for the 21st Century Act (“FIT” Act). The letter raises serious and numerous concerns about the bill which would weaken consumer and investor protections for both traditional and crypto investors and would broadly reshape financial regulatory agencies’ jurisdictions, weakening needed regulatory oversight of financial products and services writ large.

“This bill was largely written by and for the crypto industry, and it shows,” said Mark Hays, senior policy analyst for Americans for Financial Reform and Demand Progress. “This bill fails to create meaningful measures to protect investors and hold crypto firms accountable. Instead, it will legitimize risky and predatory crypto business models, put consumers and investors who engage with crypto at greater risk, and create loopholes that non-crypto Wall Street firms can use to evade oversight, threatening many more investors.”

The letter describes the bill’s problematic features:

• The bill uses an easily manipulated definition of crypto’s overhyped “decentralized” technology to determine regulatory oversight and legitimize risky industry practices.
• It gives primary regulatory authority over crypto markets, via a rubber stamp self-certification process, to the Commodity Futures Trading Commission, an underfunded and understaffed agency that lacks a real retail investor protection mandate.
• Until the bill’s rules are established, the bill exempts crypto firms from ongoing regulatory enforcement actions. And, the bill makes these changes at the expense of SEC oversight and its more robust investor protections.
• What little SEC oversight that remains is watered down, such that even online crowdfunding schemes for raising capital would receive more oversight than many crypto firms.
• The bill’s worst feature rewrites long standing securities law for crypto’s benefit by exempting a large set of crypto products from the definition of security in the SEC’s authorizing law, even though many clearly are and should be regulated as such. And, letter signatories are deeply concerned this aspect of the bill would have major implications beyond crypto.

“This key aspect of the bill would not only erode key existing protections for crypto investors but also create a roadmap for traditional Wall Street firms to evade long standing investor protection rules,” said Hays. “That could further fuel risky speculation and harm a much wider array of investors, even if they never touch crypto.”

The vote this week comes as Congress has been flooded with messages by crypto trade groups and crypto firms – many facing lawsuits for noncompliance with financial regulations – push for the bill, and as as crypto super PACs – backed Silicon Valley venture capitalists who often seek short-term profits via risky crypto ventures – promise to spend tens or even hundreds of millions of dollars this election cycle.

“In 2022 when crypto firms’ fraud and failures caused the crypto market to crash, though many were harmed, millions more investors and markets as a whole were protected because regulators kept risky crypto firms at arms’ length, ” said Hays. “Enacting this bill deregulatory measures could expose millions more investors to the systemic risks posed by the crypto industry and set the stage for another financial crisis in the years to come.”

Signatories of the letter in addition to AFR and Demand Progress include the American Federation of State, County and Municipal Employees (AFSCME), American Association for Justice, American Economic Liberties Project, AFL-CIO, Center for American Progress, Center for Economic Integrity, Center for Responsible Lending, Clean Energy Action, Communication Workers of America, Consumer Federation of America, Consumer Federation of California, Consumer Reports, DC Consumer Rights Coalition, Democracy for America Advocacy Fund, Economic Action Maryland, Empower Our Future, Food and Water Watch, Groundwork Data, Institute for Agriculture and Trade Policy, Maine People’s Alliance, National Community Reinvestment Coalition, National Consumer Law Center, on behalf of its low-income clients, P Street, Public Citizen, RAISE Texas, Revolving Door Project, Rise Economy, US PIRG, Take On Wall Street, Texas Appleseed, THIS! Is What We Did, Virginia Poverty Law Center, and Woodstock Institute, and 350 Hawaii.

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