Bipartisan Efforts to Regulate Digital Assets in Congress
In an unusual display of bipartisanship, a coalition of lawmakers from both the Republican and Democratic parties in the House of Representatives unveiled a proposed legislation on Friday aimed at providing regulatory clarity within the digital asset sector. The initiative, named the Digital Asset Market Clarity Act, is led by French Hill (R-Ariz.), who chairs the House Financial Services Committee. Key supporters include G.T. Thompson (R-Penn.) and Angie Craig (D-Minn.), the chair and ranking member of the Agriculture Committee, respectively.
The proposed legislation seeks to differentiate digital commodities sold through investment contracts from being classified as investment contracts themselves. This change would enable issuers to develop digital assets using blockchain smart contracts without having to adhere to the investment contract regulations, provided that the sale contract itself complies with the necessary rules. Furthermore, the bill aims to exempt sales offers of investment contracts tied to digital commodities from the standard security registration requirements, under specific conditions.
Issuers will be obligated to confirm to the Securities and Exchange Commission (SEC) that the blockchain system utilized for the sale offer is sufficiently mature. The legislation mandates that the SEC undertake rulemaking to outline the criteria which would determine the maturity of a blockchain, while also permitting SEC-regulated brokers, dealers, and exchanges to utilize blockchain for their record-keeping and bookkeeping obligations. Significantly, the legislation grants the SEC authority over digital commodities activities performed by SEC-registered broker-dealers and exchanges that would otherwise be exempt from registration requirements with the Commodity Futures Trading Commission (CFTC).
Additionally, the bill introduces new CFTC-registered categories, including Digital Commodity Exchanges, Digital Commodity Dealers, and Digital Commodity Brokers, assigning the CFTC exclusive jurisdiction over cash or spot markets involving these entities. Together, these provisions aim to clarify the jurisdictional boundaries between the SEC and CFTC, which have historically complicated the establishment of clear regulations for both crypto investors and issuers.
Other elements of the legislation focus on the registration and functioning of alternative trading systems (ATSs) that primarily engage with digital commodities and/or permitted stablecoins, as well as custodial regulations for digital assets, and the oversight of digital commodities brokers and exchanges. The bill’s journey to this point has not been smooth; a planned joint committee hearing in early May was thrown into disarray after certain Democrats, who had previously supported the legislation, expressed objections following media reports regarding President Trump and his family’s involvement in crypto transactions. This led to a significant walkout by several committee members, resulting in the hearing being abruptly restructured into a roundtable format to allow for witness testimonies.
“Our bill brings long-overdue clarity to the digital asset ecosystem, prioritizes consumer protection and American innovation, and builds off our work in the 118th Congress,” stated Financial Services chair Hill while presenting the legislation. “I look forward to delivering our bill to President Trump’s desk and securing America’s position as the global leader in digital assets.” In agreement, Agriculture Committee ranking member Craig remarked, “Digital assets, including cryptocurrencies, are transitioning from being a unique financial product to becoming increasingly integrated with our existing financial system. It is essential for Congress to establish clear consumer protections and guidelines for businesses operating in the digital asset space.”
