The Financial Innovation Technology for the 21st Century Act (FIT 21) could reshape the crypto industry.
As the crypto market continues to evolve, understanding regulations impacting the $2.6 trillion industry is crucial. During a recent discussion, Roundtable anchor Rob Nelson and John Divine, head of digital asset over-the-counter trading at Blockfills, delved into the latest legislative developments and their potential impact on the industry.
Divine highlighted the significance of the recently-passed Financial Innovation Technology for the 21st Century Act (FIT 21). This bill aims to categorize crypto projects based on their level of decentralization. “The FIT 21 bill is a game-changer,” Divine said.
“It proposes that sufficiently decentralized projects be regulated by the Commodity Futures Trading Commission (CFTC), while those not decentralized enough will fall under the Securities and Exchange Commission (SEC),” he said.
This distinction is crucial, as the SEC has been seen as an obstacle to the crypto industry, whereas the CFTC has generally been more supportive.
Divine’s strategy involves scanning the market for decentralized layer-one projects that haven’t yet made significant moves. He mentioned avoiding well-known projects like ethereum, Solana, and Avalanche, and instead focusing on lesser-known projects. “One project that stands out to me is Tezos,” he said. “Tezos launched around 2017 or 2018 and is a proof-of-stake blockchain that is highly decentralized.”
Tezos caught Divine’s attention for several reasons. Firstly, it raised a significant amount during its initial coin offering, about $230 million in bitcoin and Ether. Secondly, it has maintained a decentralized structure with a diverse network of nodes and validators. The recent launch of Etherlink, a layer-two solution for ethereum, adds to its appeal. Etherlink aims to alleviate congestion on the ethereum network without using centralized multisignature wallets.
“This is a critical advancement,” Divine explained. “Many existing layer-two solutions on ethereum are controlled by a small group through multisig wallets, but Etherlink has no such centralization,” adding that it aligns perfectly with the principles outlined in the FIT 21 bill.
Tezos has a market capitalization of about a billion dollars, which also suggests significant growth potential. Divine highlighted that if the FIT 21 bill is signed into law, there could be a renewed focus on identifying truly decentralized protocols, making Tezos a project worth investigating.
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