New Crypto (BTC) Regulatory Bill Unveiled: CFTC Set to Become Primary Regulator

A comprehensive market structure bill published Monday aims to establish clear regulatory frameworks for digital assets, potentially reshaping the U.S. crypto (BTC) landscape and bringing regulatory clarity to the industry.

Crypto (BTC) Market Structure Bill Divides Regulatory Powers

The long-awaited market structure bill for digital assets was finally released earlier this Monday by the U.S. House Financial Services Committee and the House Agriculture Committee. The discussion draft represents a significant development for the cryptocurrency industry, which has been seeking regulatory clarity in the United States for years.

Unlike the previous Financial Innovation and Technology for the 21st Century Act (FIT21), which received criticism for limiting the Securities and Exchange Commission's (SEC) authority, this new bill focuses on clearly defining the responsibilities between the SEC and the Commodity Futures Trading Commission (CFTC). Under the proposed framework, the SEC would oversee cryptocurrency offerings classified as investment contracts, while the CFTC would regulate those deemed commodities.

"Overall, this bill again would make the CFTC the dominant crypto regulator, but still gives the SEC jurisdiction until a network establishes decentralization," noted Justin Slaughter, policy expert at Paradigm, in a statement on X (formerly Twitter).

Crypto (BTC) Decentralization Test Established with Clear Metrics

One of the most notable aspects of the bill is the establishment of a clear decentralization test, which provides specific criteria for determining when a cryptocurrency project has achieved true decentralization.

According to the draft, for a project to qualify as decentralized, no single party should have unilateral control over the network. Additionally, the bill requires transparency for centralized projects, mandating the disclosure of holders controlling more than 10% of the token supply.

The legislation also introduces the concept of a "mature blockchain," defined as one that:

1. Has fundamental value
2. Is substantially developed and functional
3. Operates as an open, impartial, rules-based system
4. Is not centrally controlled or owned (with less than one-fifth of the supply controlled by a single entity)

This framework provides a clear pathway for projects to transition from centralized to decentralized status, potentially allowing them to move from SEC to CFTC oversight once certain criteria are met.

Crypto (BTC) Bill Opens Market to Retail Investors

In a move that could significantly expand cryptocurrency adoption, the draft bill removes requirements linked to net worth thresholds for investors. This change would effectively open the market to more ordinary investors, democratizing access to digital asset investments beyond just accredited investors and institutions.

This provision represents a departure from previous approaches that often limited cryptocurrency participation to wealthier individuals, potentially bringing more retail investors into the cryptocurrency ecosystem. By removing these financial barriers, the bill aims to make cryptocurrency investments more accessible while still maintaining appropriate consumer protections.

DeFi and Crypto (BTC) Protocols: Potential Regulatory Exemptions

The bill takes a nuanced approach to decentralized finance (DeFi), providing potential regulatory exemptions for certain protocols. Specifically, non-custodial DeFi platforms that do not exercise discretion over user assets may be exempt from certain regulatory requirements.

This carve-out recognizes the unique nature of truly decentralized protocols, which operate autonomously through smart contracts rather than through centralized intermediaries. By exempting these platforms from some regulations, the bill aims to foster innovation in the DeFi space while still maintaining oversight of more centralized operations.

Faryar Shirzad, Chief Policy Officer at Coinbase, expressed enthusiasm about the bill on X, stating: "There's no understating the urgency and bipartisan partnership with which Congress is moving to unlock crypto innovation in the United States."

Stablecoins Defined in Crypto (BTC) Bill Amid Senate Challenges

The bill also addresses stablecoins, providing a definition for them without classifying them as securities. This classification is significant, as it could potentially shield stablecoin issuers from certain SEC regulations that would apply to traditional securities.

However, separate stablecoin legislation has faced challenges in the Senate. As reported by U.Today, major stablecoin legislation has hit significant roadblocks, with multiple pro-crypto Democrats considering withdrawing their support.

Senate Minority Leader Chuck Schumer has reportedly expressed concerns specifically about Tether, the largest stablecoin issuer by market capitalization. These concerns highlight the ongoing regulatory debates surrounding stablecoins, which remain a contentious aspect of cryptocurrency regulation.

Broader Implications for the Crypto (BTC) Ecosystem

This comprehensive bill represents one of the most significant regulatory developments for the cryptocurrency industry in the United States. By clearly delineating regulatory responsibilities and establishing objective criteria for decentralization, the legislation could provide much-needed clarity for cryptocurrency businesses operating in the U.S.

The removal of net worth thresholds could also significantly expand cryptocurrency adoption among retail investors, potentially bringing new participants into the market. Additionally, the provisions for DeFi protocols could allow for continued innovation in this rapidly evolving sector.

However, the bill's ultimate impact will depend on whether it can navigate the legislative process successfully and gain enough bipartisan support to become law. Given the complexities of cryptocurrency regulation and the differing views among lawmakers, the path forward remains uncertain.

As the cryptocurrency industry continues to mature and integrate with traditional financial systems, clear regulatory frameworks like those proposed in this bill will be essential for fostering innovation while protecting consumers and maintaining market integrity.