Why is the FIT21 Bill important in the United States?
Companies that currently use cryptocurrencies for payments face many challenges, especially in terms of compliance. When businesses engage in transactions using cryptocurrencies, they are often required to comply with regulations from different countries, including anti-money laundering (AML) and know your customer (KYC) requirements. These compliance obligations may vary depending on the region, increasing the costs and complexity of compliance for businesses. In some jurisdictions, companies need to obtain specific licenses to legally use cryptocurrencies for payments.
For example, in the United States, some states require businesses to obtain cryptocurrency-related business licenses, such as the BitLicense in New York. The application and maintenance costs for these licenses are high, and the process is tedious.
Compared to traditional payment systems like credit cards, the compliance requirements for cryptocurrencies are more stringent. Using a credit card for transactions does not require businesses to apply for Payment Card Industry Data Security Standard (PCI-DSS) certification, an industry standard for protecting credit cardholder data. This double standard creates more obstacles for the application of cryptocurrencies in payments.
However, this situation may change with the passage of the 21st Century Financial Innovations and Technology Act (FIT21) by the U.S. House of Representatives on May 22, 2024, with 279 votes in favor and 136 votes against. This bill could become one of the most impactful legislations for cryptocurrencies in the future.
Further reading:
What is the FIT21 Bill that will be voted on this week to make the United States a cryptocurrency powerhouse?
Three key elements to determine whether a digital asset is a security or commodity:
Investment contract (The Howey Test): If the purchase of a digital asset is considered an investment and investors expect to profit from the efforts of entrepreneurs or third parties, the asset is generally classified as a security.
Use and consumption: If a digital asset is primarily used as a medium for purchasing goods or services, such as tokens used to buy specific services or products, it may not be classified as a security but rather as a commodity or other non-security asset.
Degree of decentralization: The bill emphasizes the degree of decentralization in blockchain networks. If a digital asset’s underlying network is highly decentralized and lacks central authority to control the network or asset’s functionality, the asset is more likely to be classified as a commodity.
These definitions and classification criteria pave the way for the compliance and legalization of more cryptocurrencies in the future, effectively ending the gray area that cryptocurrencies have existed in for over a decade and officially entering a new era.
The Impact of the FIT21 Bill on Businesses
The passage of the FIT21 Bill will significantly reduce the compliance costs and operational complexity for businesses adopting cryptocurrencies for payments. This is mainly reflected in the following aspects:
Unified regulatory framework:
The FIT21 Bill provides a clear regulatory framework, eliminating the need for businesses to comply with multiple laws and regulatory requirements from different countries. This reduces compliance uncertainty and risk.
Cost reduction in compliance:
Due to the unified regulatory requirements, businesses no longer need to apply for multiple licenses in different countries or regions. This will significantly reduce compliance costs, making it more affordable for businesses to engage in transactions using cryptocurrencies.
Enhanced trust and transparency:
The bill emphasizes decentralization and transparency, which helps enhance trust in cryptocurrencies in the market. Both businesses and consumers will be more willing to accept cryptocurrencies as a legitimate payment method.
Promotion of technological innovation:
The FIT21 Bill supports technology and innovation, particularly in the DeFi and NFT sectors. This will drive further technological innovation, improve the security and convenience of decentralized wallet services, and attract more businesses to adopt cryptocurrencies.
As more cryptocurrencies comply with regulatory requirements, businesses will be able to expand their markets, reach more consumers using cryptocurrencies, and potentially become a widespread payment solution for businesses.
The Deployment and Prospects of NoFi
This is also why I have always been optimistic about the future development of NoFi. This trend not only reflects the tremendous potential of blockchain technology but also demonstrates the infinite possibilities of future financial services. Compared to traditional financial services, cryptocurrencies and other securities differ in that NoFi provides us with more autonomy, better security, and greater flexibility. That’s why KryptoGO focuses on developing non-custodial wallet services. Through NoFi, we can provide more attractive solutions for businesses and consumers, reducing transaction costs, enhancing security, and achieving true decentralization.
The passage of the FIT21 Bill has brought great momentum for the development of NoFi. This bill not only provides legal protection for DeFi projects but also injects new vitality into the entire cryptocurrency industry.
I believe that NoFi will play an increasingly important role in the field of financial services in the future, bringing more innovation and change. With the rise of NoFi, we will see more application scenarios and market opportunities. High-quality non-custodial wallet services can help more businesses undergo digital transformation and drive progress in the entire industry.
Opinion articles present diverse perspectives and do not represent the stance of “WEB3+.”
Proofreading editor: Yuan-Ting Shao