The U.S. House committees have introduced a preliminary draft of a cryptocurrency market bill that outlines the roles of the SEC and CFTC, establishes criteria for decentralization, and sets regulations for retail investor access.
This draft represents a significant advancement in the regulation of digital assets. Released on Monday, May 5, 2025, by the U.S.
House Financial Services Committee and the House Agriculture Committee, the document seeks to foster a more organized and transparent regulatory framework for cryptocurrencies and associated markets.
Clear Roles for US SEC and CFTC Crypto Market Bill
The proposed cryptocurrency market legislation delineates a clearer division of responsibilities between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).
According to the suggested framework, the SEC will be responsible for regulating digital assets classified as investment contracts, while the CFTC will manage digital commodities and their spot markets.
This strategy responds to issues raised in previous discussions regarding the Financial Innovation and Technology for the 21st Century Act (FIT21).
Justin Slaughter from Paradigm remarked on X, stating, 'In general, this bill would once again position the CFTC as the primary regulator for cryptocurrencies,' although he acknowledged that the SEC would maintain its authority until decentralization is established.
Furthermore, the legislation seeks to ensure that securities laws do not apply to digital commodities traded in secondary markets unless such transactions confer rights to the issuer's profits or assets to the buyer.
Definitions for Decentralization and Network Maturity
The draft of the cryptocurrency market bill includes a definitive test for decentralization.
A project should not be solely controlled by any one entity. If any entity possesses over 10% of the token supply, this must be disclosed while the network is still centralized.
A blockchain is considered 'mature' when it demonstrates utility, is fully developed, is open, adheres to transparent regulations, and is not under central control.
These definitions are intended to clarify the point at which networks shift from being subject to securities regulation to being classified under commodities regulation.
These criteria will aid both developers and regulators in determining the governance structure of a project throughout its lifecycle.
Investor Access and Regulatory Exemptions
The proposed cryptocurrency market legislation eliminates restrictions based on wealth and income for retail investors, thereby broadening access to the market.
This change removes the requirements for accredited investor verification and suitability assessments that were previously considered obstacles to wider engagement.
Furthermore, the draft specifies the registration process for digital commodity exchanges with the CFTC and introduces an optional early registration for issuers, promoting collaborative rulemaking between the US SEC, led by new chair Paul Atkins, and the CFTC.
Regarding decentralized finance (DeFi), the draft suggests exemptions for non-custodial protocols that do not have discretionary control over users' funds.
Stablecoin Definitions and Senate Challenges
Stablecoins are outlined in the proposed cryptocurrency market legislation without being classified as securities.
Nevertheless, a distinct stablecoin proposal has faced opposition in the Senate, with nine Senate Democrats recently retracting their support due to apprehensions regarding potential risks associated with new provisions.
Senator Chuck Schumer has expressed worries about the operations of Tether, a prominent stablecoin issuer, leading to uncertainty regarding the timeline for thorough regulation of stablecoins.
Representative French Hill remarked, 'Our discussion draft builds upon that work and offers essential regulatory clarity for the digital asset ecosystem.' Representative Glenn Thompson further noted, 'Regulatory clarity is long overdue in digital asset markets.
This marks the initial step towards establishing a comprehensive framework.' A hearing entitled 'American Innovation and the Future of Digital Assets: A Blueprint for the 21st Century' is anticipated to delve deeper into the details of the draft.
Push for Capital Gains Tax Reform on Crypto Market
In conjunction with the unveiling of the draft legislation concerning the cryptocurrency market, there has been a notable rise in public discourse regarding the taxation of cryptocurrency transactions.
Stakeholders within the industry have advocated for a revision of the tax framework governing routine cryptocurrency usage in anticipation of the upcoming US SEC roundtable on cryptocurrency. Kristoph Jeffers expressed his views on X,
“Now let’s eliminate cap gains tax on Bitcoin so people can use it as currency.” Matthew Sigel, head of digital assets research at VanEck, replied, “Agreed. Hard to call it money if every purchase triggers a 1099.”
Sigel mentioned the current efforts in the Senate to implement a de minimis exemption via the Lummis-Gillibrand bill, which would permit small cryptocurrency transactions to remain untaxed.
He stated, 'A de minimis exemption for cryptocurrency transactions is long overdue and is already being developed.'
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