a16z Crypto Publishes Web3 Letter Ahead of Major Regulatory Clarity in US

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As an analyst with a background in financial markets and experience in following the crypto industry’s regulatory landscape, I strongly believe that the FIT21 bill is a significant step forward for the US digital asset sector. The increasing focus on cryptocurrencies from regulators and politicians during this election year underscores the growing importance of the Web3 and digital asset industries.

The United States’ Web3 industry and digital asset market underwent remarkable regulatory transformations in 2024, with more regulators campaigning for office expressing support for crypto. Over 50 million Americans are investors in this space.)

Previously reported by Coinspeaker, Bitcoin (BTC) is subject to regulation as a commodity in the US, similar to gold and crude oil. This week, the SEC is set to make a decision on the approval or rejection of proposed spot Ethereum (ETH) ETFs.

a16z on US Crypto Regulatory Scope

Based on a recent communication from prominent US venture capital firm a16z crypto, which specializes in web3 technologies, it is recommended that all American voters keep an eye on the Financial Innovation and Technology for the 21st Century Act (FIT21) currently under consideration in Congress. The House of Representatives is set to vote on this bill by the end of this month.

Due to this development, a16z has asked American crypto investors to encourage their political representatives to support the FIT21 bill in Congress. The bipartisan FIT21 legislation was proposed by collaboration between the House Financial Services Committee and the House Agriculture Committee, aiming to bring clarity to the cryptocurrency sector.

The FIT21 legislation sets up a regulatory structure in the United States to determine which digital assets fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC) or the Securities and Exchange Commission (SEC). This distinction is significant because the CFTC and SEC have different regulatory scopes for “commodities” and “securities,” respectively, leading to various implications in their administration. As a16z pointed out.

The FIT21 bill signifies that in the realm of cryptocurrencies, American investors will primarily be concerned with projects adhering to its definition of decentralization. As per the FIT21 bill, a crypto project will be considered decentralized if no individual entity possesses over 20% of the total voting authority.

Bigger Picture and Market Implications

The FIT21 bill, which is expected to be passed later this month, will bring about substantial changes for the majority of cryptocurrency projects, including Ethereum. Notably, Ethereum’s leading investors, such as Justin Sun, Founder of Tron, have emphasized that Ether operates on a decentralized protocol, meaning no individual or entity holds the power to exert control over it in its entirety.

Ethereum functions as a decentralized protocol, and we play a role as active contributors within this system. We possess the financial resources necessary to offer TVL (Total Value Locked) and node validation services for Ethereum, Tron, and other layer 2 projects. Our commitment is geared towards long-term growth and security across all blockchains.

— H.E. Justin Sun 孙宇晨 (@justinsuntron) May 21, 2024

Should the FIT21 bill be approved, XRP, which is supported by Ripple Labs, will be classified as a security asset due to the ongoing legal action. Notably, over 40% of the existing XRP stock lies in Ripple Labs’ possession, which they utilize for their business activities.

As a researcher studying the potential effects of this new bill, I can share that its implications are far-reaching for approximately 80% of the meme coin market. Insiders and developers find themselves in a precarious position regarding the remaining supply.

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2024-05-21 15:18