Senate’s New Digital Asset Bill Aims to Resolve SEC and CFTC Jurisdiction

• The US Senate bill grants the CFTC authority over digital commodity markets.
• The draft bill mandates stronger consumer protections and self-custody rights.
• Coordination between the SEC and the CFTC aims to resolve regulatory jurisdiction disputes.
• Industry experts call for expanded protections for decentralized finance and developers.

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The US Senate Agriculture Committee has unveiled a draft bill aimed at creating a clear regulatory framework for the digital asset market. This proposal follows the CLARITY Act passed by the House earlier in 2025. The bill, which has bipartisan backing, seeks to provide oversight over digital commodities and create consumer protections, offering a pathway to resolve conflicts between the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC). While the draft has generated positive responses, concerns remain regarding certain provisions, such as self-custody protection and decentralized finance (DeFi).

CFTC Oversight and Definition of Digital Commodities

A central element of the proposed bill is the creation of a framework where the CFTC oversees the digital commodity spot market. The bill clarifies the definition of digital commodities, which will help set boundaries between commodities and securities. This provision is particularly important as it addresses ongoing regulatory disputes between the CFTC and the SEC, which has jurisdiction over securities.

The bill requires the CFTC to establish criteria that will help determine whether a digital asset is considered a commodity or a security. This division would allow the CFTC to regulate spot exchanges involving digital commodities while the SEC would handle investment-contract tokens. The approach aims to streamline the regulatory environment and reduce potential confusion.

Customer Protection and Self-Custody Provisions

The draft bill includes several consumer protection measures to enhance security for users engaged in the digital asset market. One of the key provisions mandates customer fund segregation, which ensures that customer assets are separated from those of trading firms. The bill also includes conflict of interest safeguards, detailed customer disclosures, and prohibitions on affiliated trading practices that could create bias or unfair advantages.

While many of the consumer protection provisions are seen as positive steps, the bill’s stance on self-custody has raised some concerns. The bill includes protections for self-custody but limits these to personal use only.

This means that the protections do not extend to entities that act as custodians or financial service providers for others. Industry experts argue that this limitation could leave certain users and service providers exposed to potential risks, undermining the effectiveness of self-custody protections.

SEC and CFTC Coordination to Address Jurisdictional Issues

The proposed legislation also stresses the need for better coordination between the CFTC and the SEC. The draft bill specifies that the two agencies must work together to establish clear guidelines and resolve any jurisdictional disputes. The aim is to ensure that digital assets are not subject to overlapping regulatory requirements, which could hinder the market’s development.

Senator Cory Booker, who co-sponsored the bill, emphasized the importance of creating a cohesive regulatory environment to prevent bad actors from exploiting regulatory gaps. He stressed that as more people engage with new financial technologies, the need for effective oversight grows. “Congress must take steps to strengthen and expand regulatory frameworks to protect consumers,” Booker said in a statement.

Ongoing Debate Over Enforcement and Ethics

While the bill has strong bipartisan support, debates continue over several aspects of the proposed legislation. One of the key points of contention is the allocation of resources for enforcement. Some lawmakers are concerned about the CFTC’s capacity to manage the increased workload, particularly if it is tasked with regulating an expanded digital asset market.

Additionally, ethical concerns remain. Some Democrats have pressed for measures that would address potential conflicts of interest, particularly regarding the influence of prominent political figures and their ties to the cryptocurrency industry. The draft bill has yet to fully address these concerns, with Senator Booker acknowledging that further work is needed.

Industry Responses and Criticism

Industry leaders have largely welcomed the draft bill, appreciating the clarity it brings to the regulatory landscape. However, some experts have pointed out that the legislation still does not fully address issues like decentralized finance (DeFi) and developer protections. Alex Thorn, head of firmwide research at one firm, noted that the draft “falls short” on these critical issues.

Despite these concerns, many in the digital asset space view the bill as a necessary step toward creating a regulated market where innovation can thrive while ensuring consumer safety.

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