The latest draft of the U.S. crypto market structure bill, released by the House Financial Services and Agriculture Committees, builds on the Financial Innovation and Technology for the 21st Century Act (FIT21). It aims to clarify regulatory oversight by dividing responsibilities between the SEC and CFTC.
The SEC oversees digital assets classified as investment contracts until they are deemed decentralized, while the CFTC regulates digital commodities and spot markets. A decentralization test requires no single entity to hold unilateral control, with disclosures mandated for holders of over 10% of tokens in centralized projects. Transactions involving digital commodities are not classified as securities unless they grant ownership or profit-sharing rights, easing secondary market trading regulations.
The bill removes income and wealth limits for retail investors, eliminating accredited investor checks to broaden market participation. Stablecoins are defined without being categorized as securities, and non-custodial DeFi protocols are exempt from certain regulations. Project members must disclose token holdings above 1% of total supply to curb the influence of large firms. The SEC and CFTC are encouraged to collaborate on regulations, aiming for a cohesive framework.
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The draft has sparked debate, with some Democrats planning to protest a related hearing due to concerns over provisions favoring certain interests, including those tied to President Trump’s crypto ventures. The bill faces a complex path through Congress, with potential Senate resistance and the need for bipartisan support.
The draft crypto market structure bill, released on May 5, 2025, carries significant implications for the U.S. cryptocurrency industry, investors, and regulators. Assigning the SEC to regulate digital assets as investment contracts and the CFTC to oversee digital commodities and spot markets reduces jurisdictional overlap, potentially fostering innovation by providing predictable rules.
The criteria for deeming assets decentralized, no single entity with unilateral control could encourage projects to prioritize decentralization, but the 10% token holder disclosure requirement may burden smaller projects. By removing accredited investor restrictions, retail investors gain broader access, potentially increasing liquidity and participation but also raising risks of uninformed investments.
Excluding digital commodity transactions from securities laws unless they involve ownership or profit-sharing rights simplifies secondary market trading, likely boosting platforms handling spot trading. Exempting stablecoins from securities classification and non-custodial DeFi protocols from certain regulations could spur growth in these sectors, positioning the U.S. as a hub for DeFi innovation.
Mandatory disclosures of token holdings above 1% may increase transparency but could strain smaller projects or startups with limited resources. Eliminating income/wealth barriers democratizes crypto investing, but without proper education, retail investors face higher exposure to volatile markets. Disclosure requirements for large token holders may reduce insider manipulation risks, enhancing investor confidence.
Political and Regulatory Challenges
Democratic opposition, partly due to perceived ties to Trump’s crypto ventures, could delay or derail passage, especially in the Senate, where bipartisan support is critical. Encouraging SEC-CFTC collaboration aims to streamline regulations, but differing agency priorities may slow implementation. Clear regulations could attract crypto businesses, countering the trend of firms moving offshore to jurisdictions like Singapore or Dubai.
If disclosure and compliance requirements are too stringent, smaller firms may struggle, potentially consolidating market power among larger players. Increased retail access and regulatory clarity could fuel speculative trading, inflating asset prices and raising bubble concerns. Until the bill is finalized and agencies issue detailed rules, market uncertainty may persist, affecting investor and business decisions.
The bill could transform the U.S. crypto landscape by fostering innovation, expanding access, and clarifying regulations, but its success hinges on navigating political divides and balancing investor protection with industry growth. Stakeholders should monitor Congressional debates and agency rulemaking for clarity on enforcement.