A renewed attempt to define the regulatory perimeter for digital assets in the United States has arrived in the form of a discussion draft released by House lawmakers.
The draft legislation, introduced jointly by the House Financial Services Committee and the House Agriculture Committee, marks the latest effort to build a comprehensive federal framework for the crypto market.
Its primary objective: to draw clearer boundaries between the jurisdiction of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), whose overlapping mandates have long been a source of industry uncertainty and legal disputes.
The bill follows the trajectory set by the Financial Innovation and Technology for the 21st Century Act (FIT21), which advanced through the House last year but failed to progress further. This new proposal is both an evolution of FIT21 and a response to increasing calls for regulatory clarity amid high-profile enforcement actions, ongoing litigation against major crypto entities, and fragmented state-level oversight that has further complicated compliance for digital asset developers and platforms.
The draft legislation will serve as the focal point of a joint subcommittee hearing scheduled for Tuesday, where members of Congress will assess the proposal’s provisions and the broader implications for the digital asset economy in the U.S.
Jurisdictional Clarity and Regulatory Certainty
The central issue the bill seeks to address is a jurisdictional tug-of-war between the SEC and CFTC over how digital assets should be classified - and therefore, which agency should regulate them. In current practice, the SEC treats most tokens as securities, while the CFTC has claimed oversight of certain crypto assets as commodities, particularly Bitcoin and derivatives products.
The draft bill attempts to resolve this ambiguity by establishing "clear lines" between securities and commodities in the crypto context. It outlines a framework in which digital assets can transition from being treated as securities at the fundraising stage to being regulated as commodities once they achieve sufficient decentralization or network maturity.
Under the proposed structure, developers could choose to raise capital under SEC oversight, complying with disclosure requirements and securities registration. But if their digital assets meet specified criteria for decentralization, developers could then apply to register the assets with the CFTC as digital commodities, effectively shifting them into a lighter regulatory environment designed for trading and market activity.
This mechanism is similar in spirit to the concept of a "transition phase" previously discussed in crypto regulatory circles, where tokens might begin life under one regulatory umbrella and eventually move to another based on functional criteria.
Public Disclosure Requirements and Registration Paths
Among the provisions outlined in the discussion draft are detailed disclosure mandates for digital asset developers. These would apply during the initial fundraising or token issuance phase, especially for assets considered securities.
The bill proposes a dual-track registration approach:
- SEC Oversight: Projects issuing tokens as part of a capital raise would be required to register the asset offering with the SEC and meet disclosure obligations, similar to how equity offerings work in traditional finance.
- CFTC Oversight: Projects that reach a decentralized or functional threshold could register the asset with the CFTC as a digital commodity, placing it under a different set of rules focused on market integrity, trading infrastructure, and surveillance.
The proposal appears designed to appease both agencies while providing crypto developers a structured path forward—something that has largely been missing in the U.S. crypto legal environment.
A Wider Push for Crypto Regulation
This market structure bill is just one component of a broader legislative push within Congress to regulate digital assets. Stablecoins, in particular, have become a parallel track of legislative activity, with bills already advancing through House and Senate committees. Lawmakers see stablecoins as low-hanging fruit in the regulatory process due to their increasing use in payments and perceived systemic relevance to both the crypto sector and the broader financial system.
The two legislative tracks - market structure and stablecoins—form the backbone of the current Congressional crypto agenda. While the FIT21 successor draft focuses on delineating agency authority and setting up registration processes, the stablecoin bill - currently represented in the Senate by the GENIUS (Guiding and Establishing National Innovation for U.S. Stablecoins) Act - seeks to impose federal standards on the issuance and backing of fiat-pegged digital currencies.
Crypto lobbying organizations including the Blockchain Association, Crypto Council for Innovation, and the Digital Chamber have jointly urged the Senate to accelerate work on the GENIUS Act, describing it as essential to advancing a bipartisan approach to digital asset regulation.
Enforcement-Driven Status Quo
The need for legislative action has become more pressing amid aggressive regulatory enforcement led by the SEC under Chair Gary Gensler. The agency has brought lawsuits against several major crypto exchanges, including Coinbase, Binance, and Kraken, alleging unregistered securities offerings and failure to comply with investor protection laws.
The crypto industry has long criticized this enforcement-centric approach, arguing that it leaves companies operating in legal uncertainty, especially when the criteria for what constitutes a security in the digital realm remain vague. The Howey Test, the SEC's primary tool for identifying investment contracts, has come under scrutiny for being ill-suited to blockchain-based systems, where tokens often have both utility and speculative characteristics.
The draft bill attempts to move the regulatory conversation out of the courtroom and into the legislative process by proposing rule-based criteria for asset classification and oversight jurisdiction.
Challenges Ahead
Despite the bill's intent to simplify crypto regulation, its path through Congress is far from assured. Regulatory turf battles between the SEC and CFTC are likely to intensify as the bill’s implications become clearer. The SEC, in particular, has shown little willingness to concede authority over crypto tokens, and critics may argue that the bill risks weakening investor protections if too many assets are allowed to "graduate" from SEC oversight to the CFTC's lighter regime.
Moreover, political dynamics could complicate the bill’s advancement. While Republican lawmakers have generally been more supportive of industry-friendly legislation, Democratic concerns over investor protections, systemic risk, and illicit finance remain strong.
The political environment is further charged by former President Donald Trump's increasing involvement in crypto-related ventures, including recent reports that his media company may launch a token and wallet infrastructure. This has led to concerns that crypto legislation could become entangled with broader partisan conflicts.
Industry Impact
If passed in something close to its current form, the bill could offer regulatory relief and certainty to a wide swath of the U.S.-based crypto industry. Projects that have struggled to navigate SEC scrutiny or that halted token launches due to unclear rules might find a path forward under the dual-track model.
On the other hand, projects that previously relied on ambiguous definitions or operated without regulatory engagement might face new compliance burdens, especially around disclosure and registration. Centralized exchanges, in particular, could see greater pressure to verify the classification status of the tokens they list and to register appropriately with federal agencies.
Some DeFi protocols, depending on how the legislation ultimately handles decentralization criteria, could be either legitimized or caught in new regulatory traps.
As the U.S. takes tentative steps toward crafting its own crypto framework, other jurisdictions have moved more decisively. The European Union's Markets in Crypto-Assets (MiCA) regulation, which establishes a comprehensive legal regime for crypto service providers, is set to go live in phases throughout 2024 and 2025. Similarly, jurisdictions like the U.K., Singapore, and Hong Kong have rolled out increasingly sophisticated approaches to licensing and compliance.
The proposed U.S. legislation could help align American regulatory policy with these international developments - if enacted. Conversely, a failure to pass coherent federal rules may continue to drive blockchain developers, exchanges, and investment capital offshore.
Final thoughts
The immediate next step is the Tuesday joint hearing of the digital asset subcommittees, where lawmakers will scrutinize the discussion draft and take input from expert witnesses. Depending on the outcome, the draft may evolve through further negotiation, be introduced formally as a bill, or become part of a broader legislative package.
While the road ahead remains uncertain, the discussion draft represents a significant milestone in the ongoing effort to bring clarity to the regulatory status of digital assets in the U.S. - a debate that has remained unresolved since Bitcoin’s emergence over a decade ago.