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- Crypto regulation is clarified by assigning oversight to the SEC for investment contracts and to the CFTC for crypto commodities.
- A new test defines decentralization, with a 20% control cap and transparency rules during a project’s centralized phase.
- Regulators exempt certain DeFi protocols from regulation if they are non-custodial and autonomous. They give stablecoins a legal definition.
In the U.S. digital asset industry, a discussion draft of a much-anticipated crypto market structure bill was released Monday by the House Financial Services Committee and the House Agriculture Committee. This legislative effort seeks to bring long-awaited clarity to the often murky regulatory landscape for digital assets.
People see the draft bill as a refined response to earlier proposals like the Financial Innovation and Technology for the 21st Century Act (FIT21). The FIT21 proposals sparked criticism for limiting the authority of the Securities and Exchange Commission (SEC). In contrast, the new version attempts to strike a more balanced approach, delineating the regulatory domains of both the SEC and the Commodity Futures Trading Commission (CFTC).
Under the proposed framework, the SEC would oversee digital assets that qualify as investment contracts, while the CFTC would assume jurisdiction over cryptocurrencies categorized as commodities. Lawmakers intend this division to resolve the long-standing turf war between the two agencies. It provides the industry with a clearer compliance roadmap.
“Overall, this bill again would make the CFTC the dominant crypto regulator but still gives the SEC jurisdiction until a network establishes decentralization,” said Justin Slaughter, policy director at Paradigm, in a post on X (formerly Twitter).
Crypto Projects Face 20% Control Cap
The bill introduces a formal test to determine whether a crypto network is sufficiently decentralized. This test is a critical factor in deciding regulatory oversight. The draft states that a single entity exercises unilateral control. This prevents the project from being considered decentralized. Moreover, the project must publicly disclose any party holding more than 10% of the token supply while it is still in a centralized phase.
In this context, the draft classifies a blockchain as ‘mature’ if it meets several criteria. It must be substantially developed, operational, transparent, impartial, and governed by rules, not entities. No single entity can control more than 20% of its token supply.
Experts expect the ‘decentralization and maturity’ framework to serve as a cornerstone for future regulatory determinations. It could influence how both startups and existing projects structure their governance and token distribution models.
The draft also proposes removing net worth requirements that have historically restricted participation in crypto markets to accredited investors. If passed into law, the bill would open the door to a broader pool of retail investors, aligning with the decentralized ethos of accessibility that underpins much of the crypto movement.
New Bill Defines Stablecoins and Protects DeFi
In another major highlight, the bill exempts certain decentralized finance (DeFi) protocols from regulatory scrutiny, provided they are non-custodial and operate without discretion effectively, functioning as open software rather than centralized financial intermediaries.
The bill provides stablecoins with a legal definition without categorizing them as securities. This move could alleviate ongoing legal uncertainty around their issuance and use. However, stablecoin legislation still faces hurdles in the Senate. Several Democratic lawmakers have expressed concerns, and Senate Minority Leader Chuck Schumer has reportedly raised red flags regarding Tether, one of the most widely used stablecoins.
Many herald the bill as a pivotal moment for the U.S. crypto industry. The industry has long sought clear and comprehensive regulation to unlock innovation while protecting consumers.
“There’s no understating the urgency and bipartisan partnership with which Congress is moving to unlock crypto innovation in the United States,” said Faryar Shirzad, Chief Policy Officer at Coinbase.
Congressional interest in crypto regulation is gaining momentum. This draft could shape how digital assets are governed in the world’s largest economy. It could become a foundational element in the process.
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