Crypto Market Structure Draft Bill Released: Big Questions Loom

TLDR

• The Senate Agriculture Committee released a draft crypto market structure bill on Monday.
• The bill aims to clarify the jurisdiction between the CFTC and SEC over crypto market regulation.
• Key provisions in the bill are still in brackets, indicating unresolved sections and ongoing negotiations.
• The draft bill defines blockchain terminology and directs joint rulemaking between the CFTC and SEC.
• Some lawmakers continue to raise concerns about the bill’s scope and the crypto industry’s risks.

The Senate Agriculture Committee released its draft crypto market structure bill on Monday. This move brings the Senate closer to defining the Commodity Futures Trading Commission’s (CFTC) jurisdiction over spot market trading. The draft, still with some sections pending agreement, seeks to clarify the boundaries between the CFTC and the Securities and Exchange Commission (SEC). These agencies have been working to offer more guidance on crypto regulation, but Congress must make the final decision on their authority.

The bill, led by Senator John Boozeman and Senator Cory Booker, includes provisions on blockchain terminology. It also directs the CFTC to work with the SEC on joint rulemaking. These rules will cover aspects like portfolio margining and oversight of intermediaries. However, some sections of the draft still require further negotiation, leaving a few issues unresolved.

Key Issues Left Unresolved in Crypto Market Structure Bill

Despite the draft’s release, some crucial sections are still in brackets, indicating ongoing discussions. One such issue is the potential conflict over jurisdiction between the Agriculture Committee and the Banking Committee. The draft reflects a “minority view,” where some lawmakers believe the Agriculture Committee lacks authority over certain parts of the bill.

Other unresolved matters include how the bill will interact with existing laws. For example, a section on the CFTC’s commissioner makeup still needs clarification. This part of the bill could influence how the CFTC operates, especially with only one acting chair, Caroline Pham, currently in charge.

The release of the draft is just one step in a long legislative process. The Senate is dealing with a number of pressing issues, including a budget dispute that has led to a government shutdown. This has narrowed the Senate’s ability to focus on crypto-related legislation.

While the bill is progressing, it faces further hurdles in the coming months. Lawmakers need to address disagreements within their own parties, especially regarding key provisions of the crypto market structure. Some senators, such as Elizabeth Warren, continue to raise concerns over the potential risks of the crypto industry.

The crypto industry is closely watching the bill’s development. The DeFi Education Fund expressed hope that the bill would include protections for decentralized finance developers. Executive Director Amanda Tuminelli emphasized the importance of distinguishing between centralized intermediaries and developers without control over other people’s money.

With the Agriculture Committee overseeing the CFTC and the Senate Banking Committee handling the SEC, both committees need to advance their versions of the bill. While both have made progress, some disagreements remain, especially in the Senate Banking Committee. Discontent among committee members may delay the bill’s advancement to the next stage of the legislative process.

Senate Crypto Bill Likely Delayed Until 2026

Despite the progress made on the draft bill, the path to Senate approval remains unclear. Lawmakers have shifted the expected timeline for finalizing the legislation multiple times. Initially, the deadline was set for August, then moved to September, and most recently, the end of the year.

Crypto lobbyists and industry advocates have expressed cautious optimism that the bill could reach the Senate floor by early 2026. Ron Hammond, head of Policy and Advocacy at Wintermute, indicated that the committees could vote on their versions of the bill by the year’s end. However, he also noted that a Senate vote may not occur until early next year, depending on how the negotiations unfold.

The Senate’s focus on passing a crypto market structure bill continues, but negotiations are slow. Lawmakers must navigate a complex political environment with various stakeholders holding differing views. The draft bill is only one piece of the larger legislative puzzle.

The next steps in the legislative process will include addressing unresolved issues in the draft and advancing it through the committee stages. Once the committees reach an agreement, the bills will likely be combined before being sent for a final vote. However, as recent events show, the legislative process is often subject to delays.

The draft bill is a key development in the Senate’s efforts to regulate the crypto market structure. It represents a step forward in clarifying how the CFTC and SEC will share authority over crypto markets. Still, much work remains before any final legislation is passed.

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