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Theres been a lot of coverage about the Financial Innovation and Technology for the 21st Century Act (FIT 21), which should receive a Congressional vote today. However, theres been little reporting about the details of the Act. While its a bipartisan Bill, some Democrats, the White House and the SEC oppose it. The Billsmajorprogress is recognizing that some digital assets shouldnt be regulated as securities. At the same time, it has several flaws and may need more work.

Update: as expected, a significant number of Democrats (71) voted in favor of the Bill, so it was approved with 279 votes in favor and 136 opposed.

Today the White House issued a statement saying, The Administration is eager to work with Congress to ensure a comprehensive and balanced regulatory framework for digital assets, building on existing authorities, whichwill promote the responsible development of digital assets and payment innovation and help reinforce United States leadership in the global financial system.

It added that itdoesntsee the Bill providing sufficient investment protections.

Meanwhile, the Bill isnotexpected to be heard in the Senatesoon, so there may be time to implement fixes.

To examine some of the flaws, we first need some context.

The Bill splits supervision of digital assets between the CFTC for digital commodities and the SEC for restricted digital assets.A keyrequirement to be classified as a digital commodity is some degree of decentralization. That includes the issuer not controlling the blockchain or protocol and not owning or influencing more than 20% of the digital commodity tokens or its votes, amongst other requirements.

The SEC would oversee the issuance of restricted digital assets. FIT 21 imposes disclosure rules similar to crowdfunding for token offerings of up to $75 million. Retail investors can participate, provided the investment doesnt amount to more than 10% of their income or assets.

While the Act attempts to draw lines between the CFTC and the SECs purview, itdoesnt entirely succeed,anditsmessy.

For example, to be classified as a digital commodity, the digital asset issuer must inform the SEC that it considers the digital asset to be decentralized and provide reasons. The SEC has 60 days to respond.

TodaySECChair Gary Gensler gavehis critique of the Bill. He has a point that there are rather a lot of digital assets. If hundreds or thousands of token issuers simultaneously made a decentralized declaration, the SEC wouldnt have the resources to review them all, so they automatically become digital commodities.

That could be problematic because digital commodities dont require reporting, whereas restricted digital assets require investor disclosures twice a year. Also, if a decentralized protocolis able tocoordinate governance, why shouldnt it also coordinate disclosures?

CongresswomanMaxime Waterswas also vocal in her criticism. She highlighted that the CFTC was never designed to oversee retail investments. Does it have the resources with 700 staff compared to the SECs roughly 5,000? Once a digital asset is classified as a digital commodity, the degree of oversight becomesratherlimited, which might lighten the supervision load.Additionally, once the digital asset becomes decentralized, instead of transferring the investor disclosure requirements to the governance system,theyfallaway.

While a key goal of the legislation is to sidestep the Howey Test under which the SEC classifies most digital assets as securities, lawyersDavis Polkarent convinced it succeeds. They believe the legislation leaves a backdoor for the SEC to continue to assert the Howey Test. Thats because of the way that FIT 21 defines an investment contract asset.

Additionally, the SEC is known to now consider Ether as a security because of its use in staking.Davis Polk also highlights thatthe Billsdefinition of a digital asset excludes any note.Hence, the SEC could claim staked assets are notes (securities) rather than digital assets ordigitalcommodities.

The same digital asset could simultaneously be considered a digital commodity and a restricted digital asset, depending on who owns it. Nowthatseems messy. The result is that two identical and otherwise fungible assets could be required to be traded on different systems and with different disclosure and other requirements, wrote Davis Polk.

All in all,FIT 21 seems like a step in the right direction.At the same time, it still needs a fair bit of work.

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White House resists FIT 21 crypto legislation - is it too flawed? - Ledger Insights

Last updated: May 21, 2024 13:39 EDT | 2 min read

The US House of Representatives will vote on the long-awaited Decentralization Bill, officially titled The Financial Innovation and Technology for the 21st Century Act (FIT21) this week. Experts believe this legislation could clarify and streamline cryptocurrency regulation for traders and investors in the US.

The US Decentralization Bill (HR 4763) is expected to be voted on on the House floor this week. Although it faces an uphill battle in the Senate and the possibility of a presidential veto, the effort represents the most important milestone in establishing a comprehensive US regulatory framework for digital assets.

The bills organizing principle is to clearly define the regulatory responsibilities of the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) in regulating crypto transactions.

The division of responsibilities hinges on several factors, such as the decentralization and functionality of the digital assets associated blockchain system, how the asset was acquired, and the digital asset holders.

These factors determine whether a digital asset is classified as a restricted digital asset subject to SEC rules or a digital commodity under CFTC jurisdiction.

The FIT21 seeks to regulate digital assets from their inception. Before a functional system exists, SEC-style disclosure-based regulations would apply to transactions like ICOs.

Prospective buyers would receive disclosures to assess unproven digital assets.

Meanwhile, the Blockchain Association urged a full House floor vote on the U.S. Decentralization Bill in a letter addressed to House Speaker Mike Johnson and Minority Leader Hakeem Jeffries on May 20.

The letter, undersigned by prominent crypto firms including Ripple, Kraken, and Circle, emphasized the need for legislation that offers a framework for innovation, regulatory clarity for U.S. operators, and protection for users and consumers.

We, the undersigned, write today to express our support for a floor vote for H.R. 4763, the Financial Innovation and Technology for the 21st Century Act (FIT21), the letter stated. The undersigned represent the diverse blockchain and digital asset industry including technology startups, small business service companies, infrastructure providers, regulated institutions, and investors working together to support a pro-innovation national policy and regulatory framework.

In addition to dividing regulatory responsibilities, the US Decentralization Bill establishes a certification process for blockchain systems to be treated as decentralized entities. Once certified, the digital asset becomes a digital commodity, exempt from SEC regulation.

At this point, the regulatory framework shifts to the CFTC-style conduct standards. As a digital commodity, non-insiders can trade the digital asset freely on CFTC-regulated digital commodity exchanges and through CFTC-regulated spot transactions. Insiders also gain more flexibility in transacting in the digital commodity, though certain restrictions may still apply to specific insiders, such as issuers.

If the FIT21 Act passes, it will bring much-needed clarity to crypto regulations in the US. The SEC has been enforcing rules without clear guidelines, causing uncertainty and tension in the sector. The financial watchdog has gone up against every major crypto player in the country, alleging unlicensed operations and unregistered securities offerings.

Recall that the SEC filed a lawsuit against Coinbase in June 2023 for allegedly operating as an unregistered securities exchange, broker, and clearing agency. The exchange had, in turn, sued the SEC for crypto rulemaking refusal due to its constant crackdown on crypto firms. This also resulted in Coinbase Chief Legal Officer Paul Grewal rallying major exchanges to query SECs actions, which can have serious implications for the crypto industry.

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US House of Representatives Set To Vote On Decentralization Bill - Cryptonews

Decoding the Cardano decentralization debate

Cardano has recently been in the spotlight due to its surge in popularity among cryptocurrency enthusiasts and traders. This interest has not come without controversy, leading to passionate debates about the platforms level of centralization and its potential impact on the ADA price.

The key argument in this controversy is the fact that, unlike other popular cryptocurrencies, a significant portion of Cardanos network is not decentralized. While Bitcoin and Ethereum operate on protocols that allow anyone to participate in the network and earn rewards, the Cardano network has seen a large percentage of its stake pools controlled by a few entities. This presents a risk of centralization, which goes against the fundamental principles of decentralization inherent in blockchain technologies.

Investor concerns over this centralization issue, coupled with broader market trends, have contributed to Cardanos ADA experiencing a significant drop in price, falling by as much as 30%. While there are certainly a number of contributing factors to this price decrease, its hard to ignore the increased scrutiny on Cardanos governance as a key element affecting investor sentiment.

When investing in the volatile and unpredictable world of cryptocurrencies, its important to consider a broad range of factors. While price movements provide valuable information, they only represent one dimension of a larger picture. The underlying technology, governance structure and market sentiment all play crucial roles in shaping a cryptocurrencys potential and its corresponding risk/reward ratio.

Thoroughly researching a cryptocurrency is an essential part of due diligence. This includes understanding the fundamentals of the technology, the motivations of its creators, and the potential risks associated with its operation. Investors need to be mindful of the aspects influencing market dynamics, ensuring they make informed decisions that align with their personal risk appetite.

The Cardano case underscores the importance of an in-depth understanding of the cryptocurrency landscape. Its a reminder that a prominent name and high market capitalization are not always indicative of a fully decentralized, secure and efficient blockchain network. And its this combination of decentralization, security and efficiency that often underpins a cryptocurrencys long-term viability and success.

As we navigate through the complexities of the crypto world, keeping a clear perspective and maintaining a disciplined approach is vital. By assessing the underlying factors that drive market sentiment and price movements, we can reveal investment opportunities otherwise hidden in the market noise and hype. Remember, the more informed your decisions are, the more likely you are to achieve your investment goals.

Jake Morrison is an insightful cryptocurrency journalist and analyst, renowned for his deep understanding of the volatile and fascinating world of digital currencies. At 30 years old, Jake combines a background in Computer Science, with a degree from a reputable tech college, and a passion for decentralized finance, making him a prominent figure in the crypto journalism landscape.

Starting his career as a software developer with a focus on blockchain technologies, Jake quickly realized that his true calling lay in educating others about the potential and pitfalls of cryptocurrencies. Transitioning to journalism, he now serves as a leading voice for a major online financial news platform, specializing in the crypto category.

Jakes articles are a blend of technical analysis, market predictions, and feature stories on the latest in blockchain innovation. He has a talent for breaking down complex crypto concepts into understandable terms, making his writing accessible to both seasoned traders and crypto novices alike. His coverage spans a wide range, from Bitcoin and Ethereum to lesser-known altcoins, as well as the evolving regulatory landscape surrounding digital currencies.

What sets Jake apart is his critical approach to the hype that often surrounds the crypto space. He emphasizes the importance of due diligence and risk management, providing his readers with the tools they need to navigate the market intelligently. His investigative pieces on crypto scams and security breaches have been instrumental in raising awareness about the importance of security in digital asset investments.

Beyond his writing, Jake is an active participant in crypto conferences and online forums, where he shares his expertise and engages with the community. He also hosts a popular podcast that delves into the latest crypto trends, featuring interviews with leading figures in the blockchain space.

Jakes commitment to transparency and education in the cryptocurrency world has made him a trusted source of information and analysis. Through his work, he aims to foster a more informed and cautious approach to cryptocurrency investment, contributing to the maturity of the space.

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Exploring the effect of the centralization controversy around Cardano on the cryptocurrency market - The National - The National

This article explores smart contract reliability in blockchain, emphasizing their pivotal role in automating agree- ments for seamless decentralized applications. Dependable smart contracts are crucial, prompting a compre- hensive examination. Chainlink, a decentralized oracle network, is central to enhancing smart contract reliability. Understanding smart contracts as self-executing entities on blockchain structures highlights their significance in fostering trust. Chainlink's role as a bridge between smart contracts and real-world data is crucial. The article unveils Chainlink's potential, examining its architecture, security measures, real-world applications, and challenges. The aim is to fortify smart contract reliability discourse. In the dynamic blockchain landscape, systems like "Astral Edge" emerge, offering users creative solutions for online investments.

Oracles are entities facilitating communication between blockchains and external sources. They play a crucial role in ensuring smart contracts receive accurate, real-world data.

Smart contracts face challenges in accessing real-world data, creating a need for oracles. The execution and verification of data become complex without a reliable intermediary.

Oracles act as bridges, providing smart contracts with external information. This ensures the seamless integration of real-world data into blockchain-based applications.

The trust and security of smart contracts heavily depend on the accuracy and reliability of data provided by oracles. A compromised oracle could undermine the entire smart contract system.

Chainlink's architecture is designed to be decentralized and tamper-resistant. Nodes, the fundamental components, work collectively to provide reliable data to smart contracts.

Chainlink's nodes retrieve data from various sources, ensuring decentralization. This decentralized approach enhan- ces reliability by mitigating the risk of a single point of failure.

Chainlink employs a unique approach to data aggregation and validation, ensuring the accuracy and integrity of information provided to smart contracts.

The tamper-resistant nature of Chainlink's oracle network is crucial for maintaining the trustworthiness of data. This resilience makes it a robust solution for enhancing smart contract reliability.

Chainlink incorporates robust security mechanisms to safeguard its oracle network. These measures include a reputation system for oracle nodes and protocols for data integrity.

The reputation system evaluates the reliability of oracle nodes, promoting accountability. Nodes with a strong reputation are more likely to be chosen for data retrieval.

Ensuring the integrity and accuracy of data is a priority for Chainlink. This is achieved through cryptographic methods and consensus mechanisms among nodes.

Chainlink actively addresses potential vulnerabilities in smart contracts and oracles. Continuous improvements and updates contribute to a more secure and reliable ecosystem.

Chainlink has found success in diverse industries, demonstrating its adaptability and reliability. Explore notable use cases where Chainlink has addressed specific challenges.

Discover how Chainlink has been applied in different scenarios, providing solutions to unique challenges in decen- tralized applications.

Chainlink's collaborations and partnerships have expanded its reach and influence. Explore how these partnerships leverage Chainlink's capabilities to enhance smart contract reliability.

The practical applications of Chainlink offer valuable lessons for the broader blockchain community, shedding light on effective strategies for ensuring smart contract reliability.

Delve into the potential evolution of Chainlink and decentralized oracle networks. Analyze upcoming features and improvements outlined in Chainlink's roadmap.

Explore the role of Chainlink in emerging technologies such as DeFi and NFTs. Understand how it continues to shape and influence the broader blockchain ecosystem.

Predict how Chainlink's growth and development may impact the broader blockchain landscape, influencing the adoption and integration of decentralized oracle networks.

Evaluate criticisms and controversies surrounding Chainlink, addressing concerns raised by the blockchain commu- nity. Provide a balanced perspective on potential drawbacks.

Explore community concerns regarding transparency, accountability, and potential drawbacks of Chainlink's app- roach to ensuring smart contract reliability.

Examine potential regulatory challenges faced by Chainlink and decentralized oracle networks. Understand how the project aims to navigate regulatory landscapes globally.

Discuss the importance of transparency and accountability in the operation of Chainlink's oracle network. Highlight efforts made by Chainlink to address concerns and maintain trust.

In conclusion, the exploration of Chainlink's potential in bolstering smart contract reliability reveals crucial insights for the broader blockchain ecosystem. Emphasizing the significance of reliable smart contracts, this analysis underscores the pivotal role Chainlink plays in ensuring the integrity and security of decentralized applications. Furthermore, a call for continued research and development in decentralized oracle networks is made, highlighting the ongoing efforts to advance the reliability and overall robustness of smart contracts. Closing thoughts center on the future of smart contracts, acknowledging the transformative impact Chainlink has had and emphasizing its ongoing role in shaping the evolution of blockchain technology. The narrative concludes with a recognition of the continuous pursuit of improvement in reliability as a key element in the ever-evolving landscape of decentralized technologies.

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Unlocking the Capabilities of Chainlink in Ensuring Smart Contract Reliability - Siliconindia.com