Beijing Time, May 22, the U.S. House of Representatives voted to pass the digital asset regulatory framework known as the "Financial Innovation and Technology 21st Century Act (FIT21)", marking a key step for the U.S. in the regulatory path of the digital asset market. The bill passed with a significant margin of 279 votes in favor and 136 against, garnering bipartisan support that has drawn global market attention. The far-reaching implications of the bill on the division of powers between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), the digital asset service space for banks and financial institutions, and the flow of off-exchange funds have become core variables in the current pricing and expectation dynamics of the global crypto market.

Passage of the Bill and Reshaping of the Regulatory Landscape

● News Driven: On May 22, Beijing Time, FIT21 gained support from over 40 Democratic lawmakers in the House, leading to its passage with a vote of 279:136, significantly higher than the support for most bills in the digital asset space.
● Division of Powers: One of the core aspects of the bill is the first attempt to clarify the jurisdictional boundaries of the SEC and CFTC over digital assets through legislation under the existing SEC's "enforcement priority, rules lagging" framework, providing a foundational framework for "what constitutes a security and what constitutes a commodity," aiming to change the long-standing state where asset attributes are determined by fragmented judicial precedents and regulatory interpretations.
● Background of Regulatory Disputes: Over the past two years, the SEC has initiated a series of enforcement actions against leading platforms, including Coinbase and Binance.US, on the grounds of "unregistered securities issuance/trading," leading to widespread criticism of "regulatory enforcement replacing legislation"; the CFTC has continuously reinforced its position as a "commodity regulator" in the derivatives markets for BTC, ETH, etc., creating a mismatch between actual jurisdiction and legal foundations.
● Presidential Position: The White House issued a statement before the vote, stating it does not support but will not threaten a veto, indicating a cautious attitude from the administration towards completely stifling industry innovation in an election year, but it is not yet prepared to provide comprehensive endorsement for digital assets.
● Legal Progress: Although the bill passed the House smoothly, research briefs indicate that there is currently no clear timetable for Senate review, and it involves coordination among multiple parties, including the Agriculture Committee and the Banking Committee, leading to significant uncertainty in future progress.

Redefining the Digital Asset Service Space for Banks and Institutions

● Banking Industry Stance: The Independent Community Bankers of America (ICBA) has publicly stated multiple times before and after the bill's vote that it supports legislation to provide clear rules for banks regarding digital asset custody and settlement, arguing that the current reliance on regulatory guidance and "case-by-case approvals" raises compliance costs and weakens traditional banks' competitiveness against crypto-native institutions in payment and custody areas.
● Licensing and Trust Pathways: Research briefs indicate that over the past three years, several institutions in the U.S. have entered the digital asset custody and settlement business through state-level trust licenses, special purpose depository institutions (SPDI), and federal trust frameworks, but the lack of unified federal standards has led to institutional friction in cross-state business expansion and collaboration.
● Impact of Capital Constraints: Under the current Basel framework, most large banks treat digital assets as high-risk weighted assets, occupying significant capital and limiting their allocation to trading, market-making, and lending activities. If FIT21 can clarify the risk recognition logic for digital assets in commodity/non-security scenarios, it is expected to provide banks with more capital space in subsequent regulatory rule revisions.
● Demand for Compliant Custody: Institutional investors (including pension funds, endowments, and some registered investment advisors) generally require digital asset custodians to be regulated financial institutions or trust institutions with equivalent regulatory strength in their internal risk control policies. If the bill clarifies that banks can provide related services within compliance boundaries, it will directly expand the "investable asset pool" and increase the institutional allocation limits for mainstream assets like BTC and ETH.
● Changes in Competitive Landscape: Currently, the U.S. crypto custody and service market is dominated by a few players such as Coinbase Custody and Fidelity Digital Assets; if large commercial banks and Wall Street brokerages accelerate their entry after legal risks decrease, it may pressure the bargaining power and market share of existing crypto-native service providers, restructuring the institutional funding chain.

Focus of the Bill: SEC, CFTC, and Asset Attribute Division

● Regulatory Division Intent: One of the policy goals of FIT21 is to reduce "regulatory gray areas" and "overlapping jurisdictions" by defining certain types of digital assets as subject to CFTC commodity regulation under specific conditions, attempting to provide the market with a predictable path to distinguish between "commodity-type tokens that can be freely traded on exchanges" and "security-type tokens that must circulate on registered platforms."
● Market Expectations: Research briefs show that the industry generally hopes that this bill will reduce the uncertainty of "ex-post enforcement + hefty fines", bringing more disputes to the forefront as "registration and disclosure according to rules," and providing compliant exit routes for secondary market trading, especially for assets in gray areas such as DeFi tokens, functional tokens, and governance tokens.
● SEC Response: SEC Chairman Gary Gensler issued a public statement after the bill's passage, stating that FIT21 will "cause a significant regression in investor protection," with core concerns including: some tokens that do not yet have mature governance structures and transparent information disclosure, if classified as "commodity-type digital assets," may bypass the SEC's strict information disclosure and anti-fraud rules, amplifying risks for retail investors.
● Regulatory Arbitrage Risks: The brief points out that some voices in the industry are concerned that if the regulatory design is not precise, project teams may deliberately circumvent the standards for securities classification through technical or structural design, packaging tokens that essentially have fundraising and equity substitution functions as "commodity-type," enjoying a relatively relaxed issuance and trading environment under the CFTC framework.
● Textual Detail Limitations: As the research brief did not provide more detailed provisions for the definition of securities/commodities, there is currently high uncertainty in the market regarding "which assets will automatically, or under what conditions, fall under CFTC jurisdiction," and this uncertainty itself is seen as a potential pressure point for subsequent amendments to the bill and secondary legislation.

Side Signals of Disagreement Between the GENIUS Act and CBDC

● Legislative Conflict Background: Almost simultaneously, the U.S. House of Representatives passed the "GENIUS Act to Prevent the Federal Reserve from Issuing Retail CBDCs," led by Senator Ted Cruz and others, explicitly opposing the Federal Reserve's direct issuance of retail digital dollars to the public, citing concerns over privacy and government surveillance risks.
● Regulatory Concept Division: On one hand, Congress is attempting to provide a clearer regulatory framework for digitally issued assets by the private sector in FIT21, while on the other hand, it sets political and institutional barriers against central bank-led forms of digital currency through the GENIUS Act, indicating a deep division in the U.S. regarding the "state-led vs. market-led" path for digital currency.
● Lummis's Voice: Senator Cynthia Lummis emphasized on social media that the passage of the GENIUS Act reflects a consensus in Congress to "limit the federal government's direct control over personal transaction data," and she is also a proponent of several digital asset-friendly legislations, reinforcing the U.S. policy image of "advancing digital asset development primarily through market innovation."
● Political Signal Implications: Research briefs indicate that the passage of the GENIUS Act, even though there are still variables at the Senate and White House levels, has sent a clear signal globally: the U.S. is unlikely to implement retail CBDCs on a large scale in the short term, focusing more on providing a regulatory framework for private institutions and capital markets to participate in digital asset pricing.
● Impact on Banks and Payments: In the absence of an official unified standard for retail CBDCs, banks and payment institutions are more motivated to develop commercial digital asset solutions centered on tokenized deposits, on-chain settlement layers, and compliant custody; the regulatory framework provided by FIT21 and the political preferences released by the GENIUS Act will jointly shape the technical and compliance boundaries of this commercialization route.

Potential Restructuring of Off-Exchange Funds, Institutional Behavior, and Market Structure

● Clarification of Funding Pathways: As the regulatory framework becomes clearer, research briefs predict that large amounts of funds that originally entered the market through offshore exchanges, over-the-counter market makers, and gray trust products will increasingly enter through registered trading platforms, compliant custody, and banking channels, thereby reducing compliance and counterparty risk premiums.
● ETF and Custody Linkage: After the approval of the BTC spot ETF at the beginning of the year, traditional financial institutions such as BlackRock and Fidelity have deeply integrated compliant custodians into their infrastructure; if FIT21 provides broader space for commodity-type digital assets, the subsequent issuance of more asset categories (such as ETH or basket products) ETFs will form a closed loop with the custody/market-making capabilities of banks and brokerages.
● Institutional Strategy Adjustments: A unified regulatory framework will drive institutions to shift from "short-term event-driven allocations" to "medium- to long-term asset allocation and hedging strategies," for example, adopting more futures, options, and structured products to hedge on-chain spot and off-exchange loan exposures, improving overall capital efficiency.
● Market Making and Liquidity Structure: The brief notes that if the CFTC gains greater authority over commodity-type digital assets, the regulated futures and options markets may further expand, attracting high-frequency market makers and traditional proprietary trading firms to migrate some algorithmic strategies, thereby changing the existing liquidity landscape of "on-chain AMM + a few centralized exchange order books."
● Judicial and Compliance Costs: In recent years, several compliance disputes involving leading platforms and projects have resulted in hundreds of millions in fines and settlement expenditures, exerting long-term pressure on stock prices and token prices. If FIT21 can significantly reduce "ex-post enforcement uncertainty," institutions are expected to shift more budgets from legal risk control to product innovation and infrastructure development.

Bullish and Bearish Perspectives: The Tug of War Between Regulatory Clarity and Innovation Space

● Optimistic/Supportive Side: This is seen as a significant positive development for several reasons:
● Increased Rule Certainty: The bipartisan passage and the White House's decision not to use veto power are viewed as a clear signal that "the U.S. is not prepared to stifle the digital asset industry," which is conducive to long-term capital entry.
● Lower Entry Barriers for Institutions and Banks: With clearer regulatory boundaries, the resistance from compliance departments and risk control committees is reduced, making it easier for traditional financial institutions to obtain approval to engage in custody, brokerage, and market-making activities.
● Promoting the U.S. to Regain Discourse Power: In the context of clear regulatory rules being established in markets such as the EU's MiCA, Japan, and Hong Kong, FIT21 is seen by supporters as a key step for the U.S. to "catch up" in the global digital asset regulatory race.

● Pessimistic/Opposing Side: Concerns about potential negative impacts and risks, including:
● Concerns about weakened investor protection: Gensler and others warn that if a large number of projects evade securities classification through structural design, retail investors may bear excessive risks in an environment lacking sufficient disclosure.
● Regulatory arbitrage and regulatory vacuums: Some scholars and former regulators point out that simply classifying assets under the CFTC without detailed defining standards may create new regulatory gaps, leading to "nominal compliance but substantial loss of control."
● Uncertainty in the Senate and subsequent enforcement: Even if the bill passes the House, it may face significant amendments or even long-term shelving in the Senate. If the market overprices in anticipation of "regulatory clarity," subsequent discrepancies may amplify volatility and drawdowns.

Outlook: A New Paradigm of Market Pricing Under Regulatory Games

In the short term, the market will focus on the Senate review progress, the White House's final position, and the actual operational changes of the SEC and CFTC regarding existing enforcement cases and new projects. In this process, any marginal dynamics regarding "asset attribute classification," "bank custody licenses," and "new varieties of futures and ETFs" will become triggers for capital rotation and volatility diffusion. In the medium term, if FIT21 or its revised version is ultimately implemented, the dominance of the U.S. digital asset market is likely to gradually shift from "regulatory interpretation games" to a comprehensive competition of "capital structure, product design, and cross-border capital channels," with cooperation and conflict between banks, brokerages, and crypto-native institutions jointly shaping the market landscape and price center in the next phase.

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