A new blockchain bill: Explaining the FIT21 Bill in crypto
Sep 23, 2025・5 min read
The term "digital asset" is becoming less cryptic and more commonplace every day, but who decides the actual definition, officially and legally, and what doesn’t? In the United States, there’s currently no clear answer.
Regulatory agencies continue to debate which governmental bodies have authority over cryptocurrencies, resulting in conflicting guidance from the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC). Both have issued contradictory reports on how crypto assets should be classified and regulated, creating legal ambiguity that has slowed blockchain development, hindered investment in crypto startups, and discouraged broader adoption of digital assets.
To address this, lawmakers in Washington have begun introducing proposals aimed at establishing more straightforward guidelines, including the Financial Innovation and Technology for the 21st Century Act (FIT21).
While it’s uncertain whether the FIT21 Bill will become the definitive framework for U.S. crypto policy, the bill’s potential impact makes it worth watching.
What is the FIT21 Bill? FIT21 Bill explained
The FIT21 Bill (HR 4763) is a proposed regulatory framework for digital assets in the U.S. Its primary goal is to clarify the roles of different regulatory agencies – the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), specifically – by defining which digital assets are securities and which are commodities. It would establish more consistent guidelines in the crypto space and, in turn, reduce legal ambiguity.
In May 2024, the U.S. House of Representatives approved FIT21 with bipartisan backing, sending it to the Senate for review. After the vote, several major crypto companies, including Coinbase, voiced their support, with Coinbase CEO Brian Armstrong calling it a "historic vote" toward better crypto regulation. However, the bill failed to advance in the Senate before the session ended, meaning lawmakers must now reintroduce it in a new Congress. At the time of writing, it’s uncertain whether that will happen.
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FIT21 Bill summary for cryptocurrency
Under the FIT21 Bill, digital assets would be classified into three categories: digital commodities, restricted digital assets, and permitted payment stablecoins. Where a cryptocurrency falls within these categories determines whether the CFTC or the SEC has oversight.
The bill defines digital commodities as cryptocurrencies that are "highly decentralized," meaning no single entity has control over the network. These assets would fall under CFTC regulation. Conversely, restricted digital assets are more centralized and would be regulated by the SEC. Meanwhile, stablecoins used for payments would generally fall outside CFTC and SEC jurisdiction, except in cases like fraud.
To determine whether a cryptocurrency qualifies as a decentralized digital commodity or a centralized restricted digital asset, FIT21 outlines several factors:
Ownership stake
First, under FIT21, regulators would examine a cryptocurrency’s tokenomics and how its supply is distributed. Are tokens widely held, or does a small group control a large percentage of the supply? The SEC also considers how the cryptocurrency was introduced. Was it a "fair launch," meaning it was made available to everyone at the same time? Or did a select group of investors get early access through an initial coin offering (ICO), pre-mine, or vesting schedule?
Voting power
In some blockchain projects, cryptocurrencies serve as voting power in a decentralized autonomous organization (DAO). Governance tokens are meant to democratize decision-making, but if a small group holds a large portion of the supply, they can influence or manipulate outcomes. Some crypto projects, on the other hand, lack public or transparent voting procedures altogether – another factor that would affect whether an asset is considered truly decentralized, according to FIT21.
Control over blockchain functionality
This factor examines whether developers or other entities can change the blockchain’s operation on their own. If a small group has the power to modify key features – such as transaction validation rules or token supply – without broader input, the system may not be truly decentralized. Ideally, major blockchain decisions should require community consensus, often through on-chain governance mechanisms or decentralized voting, rather than being dictated by a select few.
Recency of changes to source code
To assess who controls a blockchain "behind the scenes," FIT21 examines how often its source code is updated. Frequent and significant changes could suggest that a small group is driving development rather than the broader community leading a decentralized, grassroots effort. In a truly decentralized network, major updates typically go through governance proposals, public discussions, and community votes before implementation. If changes happen too often or without transparent input, it may indicate centralized control.
Public marketing as an investment
Finally, according to FIT21, how a digital asset is marketed – and the message its advertising sends – can also determine how regulators classify it. If promotional materials suggest that buyers can expect to profit from a shared business venture, the asset may meet the criteria of the Howey Test – the legal standard the SEC uses to determine whether an asset qualifies as a security. If an asset meets this test, the SEC is more likely to classify it as a security, making it subject to the SEC's regulatory framework and oversight.
In contrast, digital assets primarily used within a blockchain network – such as paying gas fees or rewarding miners – are more likely to be considered decentralized commodities rather than investment vehicles. If classified as commodities, these assets would typically fall under the jurisdiction of the CFTC.
FIT21 disclosure requirements
To bolster consumer protection and accountability in the blockchain sector, the FIT21 Bill requires developers behind cryptocurrencies to release disclosures with relevant authorities to give a transparent view of their operations. These disclosures would include key data points on a cryptocurrency project, including its purpose, token issuance schedule, and business structure.
The disclosure details for digital assets also help tie individuals or entities intimately involved in the project to prevent issues like market manipulation or conflicts of interest. Besides bolstering investor confidence, these disclosure records help crypto developers understand their registration requirements and legally raise funds for their web3 ventures.
Challenges for FIT21 Bill vote
Despite FIT21's success in the House of Representatives, the bill stalled in the Senate before the legislative session ended. To move forward, lawmakers need to reintroduce it in a new session, where it could face significant revisions or renewed opposition. Even if FIT21 is brought back for consideration, it’s uncertain whether the Senate would prioritize it or how much the bill’s language might change before a formal vote.
When FIT21 passed the House, the White House and then-SEC Chair Gary Gensler openly opposed the proposed framework. Although the 2024 election brought changes to the legislative and executive branches, it remains uncertain how much political will exists to enact FIT21 in its current form. Even among lawmakers who support cryptocurrency, some may take issue with the bill’s language. Additionally, implementing FIT21 would require the SEC and CFTC to collaborate on redefining their standards for evaluating and regulating digital assets – a process that could take years, if not decades.
Ultimately, FIT21’s fate depends on shifting priorities and competing interests in Washington. While its passage in 2024 signals a growing push for a comprehensive legal framework for cryptocurrencies, there’s no way to predict how the bill will evolve in the months and years ahead. At the very least, FIT21 underscores the increasing mainstream significance of cryptocurrencies and lays the groundwork for defining digital assets in a way that balances consumer protection with innovation.
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Disclaimer: This post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional.