- Draft bill shifts crypto oversight of Bitcoin to CFTC, clarifying regulatory control.
- Defines key crypto terms and exempts mining/staking rewards from securities rules.
- Proposes CFTC registration for exchanges, while protecting non-custodial DeFi protocols.
House Republicans have released a discussion draft of a comprehensive bill aimed at defining a clear regulatory framework for the digital asset market. The proposed legislation made public on May 5, introduces structural changes that could shift regulatory control of Bitcoin and other digital commodities to the Commodity Futures Trading Commission (CFTC). This effort expands upon earlier bipartisan attempts to clarify jurisdictional boundaries and establish standardized rules across the fast-growing crypto sector.
The bill lays the foundation for classifying digital assets based on their characteristics, possibly increasing the CFTC’s role in overseeing Bitcoin and similar assets. It proposes a registration process under which entities operating digital commodity exchanges, brokers, or dealers would fall under the CFTC’s supervision. This would formalize oversight of the spot market, a responsibility currently falling into a regulatory grey area.
The proposed system also preserves the Securities and Exchange Commission’s (SEC) authority over digital assets that qualify as securities. As summarized in a draft of the new rules, raising money under SEC rules would be simple, and a separate avenue for digital commodities traders to register with the CFTC would be available. However, the goal is to remove the confusion surrounding asset classification, particularly for hybrid tokens exhibiting commodity and security features.
Definitions and Regulatory Clarifications
The bill introduces a series of definitions to remove uncertainty and fill the gaps in its structure. It also defines terms such as “digital commodity,” “blockchain system,” “decentralized governance,” “mature blockchain system,” and “permitted payment stablecoin.” These definitions standardize the words frequently used in the crypto industry and avoid conflicting regulators.
As a major provision, it states that ‘end user distributions’, which include mining, staking rewards, and other user-owned or earned asset distributions, do not constitute an offering of securities. This clarification could be used to determine whether specific DeFi protocols and decentralized projects, in general, could comply with existing securities laws.
Registration and Disclosure Requirements
Entities performing essential market functions such as custody, trading facilitation, or customer interfacing would be subject to new registration and disclosure obligations. The bill outlines how digital commodity exchanges and intermediaries would register with the CFTC, ensuring transparency and compliance with consumer protection rules.
At the same time, the draft makes room for non-custodial decentralized protocols. DeFi platforms and blockchain messaging systems are excluded from the strictures of normal financial regulation so long as they don’t exercise discretion over users’ funds. The legislation also restricts the Treasury Department and the Financial Crimes Enforcement Network (FinCEN) from issuing regulations preventing individuals from self-custodying digital assets using personal wallets.
Lawmakers Call for Swift Legislative Action
The draft was written by senior Republican lawmakers on the House Financial Services and Agriculture Committees. They stressed the need for a practical and united regulatory framework. Hill stated that the draft continued efforts from the 118th Congress to build bipartisan consensus on digital asset regulations. He added that the committee aimed to seek public input and collaborate with the Trump administration to advance the bill into law.
That happened before a scheduled hearing titled ‘American Innovation and the Future of Digital Assets: A Blueprint for the 21st Century.’ The proposal would undergo legislative review and stakeholder feedback as it works through lawmaking.
