U.S. House Unveils Comprehensive Crypto Market Structure Draft, Focused on SEC and CFTC Governance

A significant step toward clearer regulation of the cryptocurrency landscape has emerged with the release of a new discussion draft by prominent committees in the U.S. House of Representatives. On May 5, 2025, the House Financial Services Committee and the House Agriculture Committee unveiled a draft aimed at establishing a coherent and structured regulatory framework for cryptocurrencies and associated markets.

Central to this draft is the delineation of responsibilities between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). According to the proposed legislation, the SEC is tasked with overseeing digital assets deemed as investment contracts, while the CFTC will have jurisdiction over digital commodities and their spot markets. This new classification seeks to alleviate the ambiguity that has characterized cryptocurrency regulation and address concerns raised during prior discussions regarding the Financial Innovation and Technology for the 21st Century Act (FIT21). Notably, Justin Slaughter, a representative from Paradigm, remarked that this legislation essentially positions the CFTC as the primary regulator for cryptocurrencies, although the SEC would maintain oversight until decentralization is sufficiently demonstrated.

Further, the bill includes provisions to limit the application of securities laws to digital commodities traded on secondary markets unless these transactions confer rights to profits or assets from the issuer. This provision seeks to simplify regulatory compliance for various digital asset projects, reducing barriers that have, until now, hampered their operational viability.

One of the draft’s key components is its emphasis on definitions regarding decentralization and network maturity. The legislation stipulates that any blockchain project must not be subjected to unilateral control by a single entity; specifically, if any party possesses over 10% of the token supply, this must be disclosed. Moreover, a blockchain is classified as “mature” when it offers utility, is fully developed, is transparent, and operates outside central control. Such specifications are expected to assist both developers and regulators in navigating the complexities of governance throughout a project’s lifecycle.

Additionally, the draft presents a landmark shift in investor access. It abolishes wealth and income thresholds traditionally placed on retail investors, thereby democratizing access to the cryptocurrency market. This change removes accredited investor requirements and suitability checks, allowing a broader spectrum of the public to engage in cryptocurrency investments. The legislation outlines mechanisms for digital commodity exchanges to register with the CFTC, introduces an early registration option for issuers, and promotes collaborative rule-making between the SEC and CFTC under the new leadership of SEC Chair Paul Atkins.

In terms of decentralized finance (DeFi), the draft specifies exemptions for non-custodial protocols that do not exert discretionary control over user funds, thus fostering an environment that enables innovation while providing vital regulatory clarity.

Despite these advancements, the draft’s definition of stablecoins has been met with contention. Stablecoins are articulated in the proposal without being classified as securities. However, a separate stablecoin initiative has faced challenges in the Senate, particularly with a recent withdrawal of support from nine Senate Democrats. Concerns have been raised regarding potential risks that modifications to stablecoin regulations might introduce, complicating the path toward comprehensive regulation.

Senate Majority Leader Chuck Schumer has voiced particular apprehension surrounding Tether, a prominent stablecoin issuer, which has further clouded the timeline for establishing stablecoin regulations. Representative French Hill remarked, “Our discussion draft builds upon existing work and provides essential regulatory clarity for the digital asset ecosystem.” Fellow Representative Glenn Thompson added, “Regulatory certainty in digital asset markets is urgently required, and this marks the initial step toward a comprehensive framework.”

Anticipation builds for an upcoming hearing titled “American Innovation and the Future of Digital Assets: A Blueprint for the 21st Century,” where the discussion draft’s contents will be extensively reviewed and debated.

In conjunction with the discussion draft, conversations around reforming capital gains tax related to crypto transactions have gained traction. Industry leaders have begun advocating for changes in how crypto activities are taxed, especially as the SEC prepares for a roundtable focused on cryptocurrency. Industry analyst Kristoph Jeffers argued for the elimination of capital gains tax on Bitcoin transactions to facilitate its use as a viable currency. Matthew Sigel, head of digital assets research at VanEck, echoed Jeffers’ sentiment, noting the challenges that taxation presents to utilizing cryptocurrencies as currency.

Moreover, Sigel highlighted ongoing efforts in the Senate to advance a de minimis exemption through proposed legislation that would allow minor crypto transactions to go untaxed. “A de minimis exemption for crypto transactions is long overdue, and productive work is being done in that direction,” he stated, underscoring a growing recognition of the need for adaptable regulatory frameworks to support the evolving digital asset landscape.

As stakeholders from across the spectrum weigh in on these regulatory developments, the U.S. government’s moves signal a pivotal moment for cryptocurrency regulation that could shape the future of digital assets.