US Senate Releases Draft Crypto Bill Establishing Clear Regulatory Framework for Digital Assets

TLDR:

• Bill resolves SEC-CFTC conflict by assigning clear regulatory authority over securities and commodities respectively.
• Ancillary assets category exempts network tokens from IPO requirements while maintaining transparency standards.
• Exchanges must register, segregate funds, and prove reserves to prevent FTX-style failures and protect investors.
• Legislation allows projects to decentralize over time, reducing regulatory burden as networks become distributed.

The United States Senate has released a draft bill addressing cryptocurrency market structure, marking a significant step toward regulatory clarity. 

The legislation aims to resolve longstanding confusion between federal agencies and establish defined rules for digital asset oversight. 

Currently, the industry operates without clear guidelines, leaving projects uncertain about compliance requirements and investors questioning asset safety.

Regulatory Authority and Asset Classification Defined

The proposed legislation addresses the ongoing jurisdictional dispute between the Securities and Exchange Commission and the Commodity Futures Trading Commission. 

Under the current system, the SEC claims authority over most digital assets as securities while the CFTC argues they qualify as commodities. 

The bill resolves this conflict by assigning clear responsibilities to each agency based on asset characteristics.

A notable provision introduces ancillary assets as a distinct category. These tokens differ from traditional securities because they provide network access rather than company ownership. 

The framework removes IPO-style requirements for such assets while maintaining transparency standards. This approach allows innovation to continue without imposing unsuitable regulatory burdens.

Bull Theory shared analysis of the draft legislation, stating the industry currently faces a situation where “no one knows who regulates what” and “SEC and CFTC keep fighting.” 

The account noted that “projects don’t know how to launch legally” while “investors don’t know what is safe.” According to the analysis, the bill attempts to address these fundamental issues through clear categorization.

The disclosure requirements mandate projects reveal key information including development teams, token creation methods, ownership distribution, system mechanics, associated risks, and governance structures. 

The bill demands transparency with “no vague whitepapers,” according to Bull Theory’s breakdown. Projects raising over $25 million must provide audited financial statements and demonstrate legitimate fund usage. These provisions target fraudulent treasury claims and unverifiable financial data.

Protection Mechanisms and Market Integrity Standards

Developer protections represent another critical component. The bill permits builders to discuss roadmaps and features without legal liability, provided communications remain truthful. 

Bull Theory explained that under current conditions, “one tweet can get you sued,” but the legislation would allow builders to communicate about development plans “as long as they are honest.”

The legislation creates a pathway for decentralization. Projects may begin with centralized structures and gradually transition to distributed governance. 

Once sufficient decentralization occurs, regulatory treatment adjusts accordingly, with lighter oversight replacing securities-based requirements. This mechanism particularly benefits networks following the Ethereum model.

Exchange regulations receive comprehensive attention. Platforms must register with authorities, segregate customer funds from operational capital, implement custody protocols, conduct market surveillance, and prevent manipulative trading practices. These standards align cryptocurrency trading closer to traditional equity markets.

The bill criminalizes wash trading, artificial volume creation, spoofing, and front-running activities. These prohibitions aim to protect retail participants from deceptive practices. 

Bull Theory noted the legislation “directly targets FTX style failures” through proof-of-reserves requirements that mandate exchanges demonstrate actual possession of customer assets through regular verification and public transparency.

DeFi protocols gain formal recognition within financial infrastructure planning. The framework incorporates decentralized finance into cybersecurity considerations and systemic risk monitoring. 

This integration represents regulatory acknowledgment of DeFi’s growing role in the broader financial ecosystem.

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