The latest step in the federal government's broad strategy of proposing to merge digital assets and blockchain into the American financial system
Coming on the heels of the House's passage of the Digital Asset Market Clarity Act of 2025 ("Clarity Act") with strong bipartisan support, the Senate Banking Committee released its initial discussion draft for crypto market structure legislation on July 22, 2025, which is intended to build upon the Clarity Act by amending the Securities Act of 1933. While the discussion draft focuses on topics pertinent to the Securities and Exchange Commission ("SEC"), the Senate Agriculture Committee is anticipated to soon release its own discussion draft relating to topics relevant to the Commodity Futures Trading Commission ("CFTC"). Thus, the final version is likely to be a combination of concepts from all three documents. While the final version will be more comprehensive than the Clarity Act, the expansion means there will be further, and possibly time consuming, grounds for negotiation.
The House's Clarity Act set forth a regulatory framework for crypto which included delineating the oversight roles of the SEC and CFTC over crypto and introducing a provisional registration regime for digital commodity brokers or dealers and digital commodity exchanges. In brief, the Senate Banking Committee's discussion draft expands the Clarity Act by: (1) defining "ancillary assets" as not securities; (2) clarifying the definition of "investment contract"; (3) introducing a concept of "self-certification"; (4) providing areas for further rulemaking; (5) allowing bank holding companies to engage in enumerated authorized activities in crypto; and (6) requiring examination standards to prevent illicit activity.
Alongside the discussion draft, the Senate Banking Committee also issued a Request for Information seeking feedback on the discussion draft as well as a number of other areas from stakeholders, with comments due by August 5, 2025.
Senate Banking Committee Discussion Draft
The discussion draft sets forth a definition for "ancillary assets," which would not be securities but digital assets sold "in connection with the purchase and sale of a security through an arrangement that constitutes an investment contract." Such ancillary assets would not provide any financial rights or payments to its owner. Issuers of such ancillary assets, or ancillary asset originators, would be able to self-certify that their respective ancillary asset does not provide any rights that a security might, and the self-certification could then be rebutted by the SEC within 60 days. The SEC would be required to implement disclosure requirements for ancillary assets, which would include basic corporate information regarding the ancillary asset originator and its activities and economic information relating to the ancillary asset. The discussion draft would also exempt ancillary assets if their offer or sale does not exceed the greater of $75 million in gross proceeds over 10 years or 10% of its total dollar value of outstanding assets as of the date of the offer or sale. Further rulemaking is called for regarding the disposition of ancillary assets by related persons, such as promoters and founders. This should be viewed as good news for crypto entrepreneurs, who would have $75 million of "runway" before being required to consider SEC registration.
Other areas for rulemaking include a final rule to be adopted by the SEC specifying clear criteria and definitions applicable to the term "investment contract." The discussion draft builds upon the Howey test in determining whether a security constitutes an investment contract but notes that the final rule should no longer require commonality even though an investment in an enterprise is still required.[1] In prior SEC guidance issued under the Biden Administration, commonality was not viewed as a distinct element of an investment contract, although a number of federal courts required horizontal or vertical commonality to satisfy this prong.[2] The discussion draft also calls upon the SEC and CFTC to propose a joint rulemaking relating to various aspects of portfolio margining as well as for the modernization of the SEC's regulations for digital asset activities. Additionally, the discussion draft would allow the SEC to establish a micro-innovation sandbox to enable eligible firms to test innovative activities within the United States and would allow cross-border regulatory sandboxes as well.
The discussion draft also includes a section pertaining to the permissibility of digital asset activities for financial holding companies and banks, which specifies—in a complete reversal of Biden-era policy—that they could use a digital asset or blockchain system to provide any activity that they are otherwise authorized by law to perform. Authorized activities would range from providing custodial services for digital assets and distributed ledgers, engaging in payment activities involving digital assets, providing brokerage services, to facilitating secondary market transactions. The Federal Reserve, OCC, and FDIC would develop risk-based and leverage capital requirements for digital assets addressing netting agreements. The Treasury would establish a risk-focused examination and review process for financial institutions for reporting, AML, and OFAC compliance in order to prevent illicit activity.
The discussion draft excludes developers or providers from being considered as money transmitters or subject to registration requirements solely because they facilitate the creation or maintenance of services to a distributed ledger, and would also permit self-custody for persons who obtain digital assets to purchase goods or services on their own behalf. If enacted, this would provide developers with protection from regulatory overreach.
Request for Information
Along with its discussion draft, the Senate Banking Committee also issued a Request for Information from stakeholders. In addition to seeking feedback on its discussion draft, the Request for Information lists 78 questions calling for comment relating to the areas of regulatory clarity and tailoring, investor protection, trading venues and market infrastructure, custody, illicit finance, banking, innovation, and preemption. Underscoring the priority given to finalizing crypto market structure legislation, the Senate Banking Committee set a short two-week deadline for comments, with comments due by August 5, 2025.
Conclusion
With the first major piece of crypto legislation now signed into law with the GENIUS Act for payment stablecoins GENIUS Act for payment stablecoins, efforts now are speeding toward finalizing a crypto market structure bill. Combined with the SEC's Crypto Task Force, the work of the White House Crypto Czar, and the prioritization of crypto via Executive Orders, this is the latest step in the broad strategy of proposing to merge digital assets and blockchain into the American financial system.[3] It has been widely reported that the Senate is aiming to pass a crypto market structure bill by the end of September. The White House is expected to release its first crypto policy report on July 30, 2025, which is anticipated to introduce a crypto digital framework across the federal agencies.
[1] SEC v. W.J. Howey Co., 328 U.S. 293 (1946) (an "investment contract" exists when there is: (1) an investment of money; (2) in a common enterprise; and (3) with a reasonable expectation of profits; (4) to be derived from the efforts of others).
[2] SEC.gov | Framework for "Investment Contract" Analysis of Digital Assets. See also Revak v. SEC Realty Corp., 18 F.3d 81, 87-88 (2d Cir. 1994) (describing horizontal commonality as "the tying of each individual investor's fortunes to the fortunes of other investors by the pooling of assets, usually combined with the pro-rata distribution of profits" and two variants of vertical commonality which focuses "on the relationship between the promoter and the body of investors").
[3] Examples include both the federal government and some states establishing strategic Bitcoin reserves as well as major financial institutions and retailers announcing the launch of their own stablecoins and tokenized deposits and use of crypto as a service to their customers.
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