The Senate Banking Committee is finalizing a draft market structure reform bill for crypto, but faces potential headwinds from Democrats concerned about conflicts of interest.

Executive Summary

The Senate Banking Committee, under Chairman Tim Scott, is expected to release a draft market structure reform bill for digital assets. The bill aims to provide regulatory clarity and address key risks in the crypto ecosystem. However, the effort faces potential resistance from Democrats, raising concerns about conflicts of interest and the pace of the legislative process.

The Event in Detail

The Senate Banking Committee is finalizing a draft of the Responsible Financial Innovation Act of 2025 (RFIA), with plans for committee markups in late September, reviews in October, and full Senate votes in November-December. The bill seeks to clarify the SEC's role in overseeing crypto markets and establishes a jurisdictional framework allocating regulatory authority between the SEC and CFTC. The draft bill requires the SEC to consult with the CFTC on certain rulemakings. The bill includes a comprehensive approach to combating illicit finance risks associated with digital assets.

The draft legislation includes key provisions such as defining digital assets, which means any digital representation of value that is recorded on a cryptographically-secured distributed ledger. The bill also expressly permits banks and financial holding companies to engage in a wide range of digital asset activities — including custody, trading, lending, payment activities, node operation, and brokerage or derivatives services — subject to existing banking laws. The bill centers extensively on ancillary asset originators' disclosure requirements to the SEC, establishing a framework intended to promote transparency while tailoring obligations to the size and nature of the originator. Ancillary asset originators must provide semiannual disclosures to the SEC, covering corporate information, economic details about the ancillary asset, risk factors, and more. However, disclosure is not required if the originator raises less than $5 million per ancillary asset in a 12-month period and if the average daily trading volume of the asset is less than $5 million.

Market Implications

The bill's potential impact could significantly reshape the regulatory landscape for crypto in the US, impacting exchanges, custody providers, and other market participants. The legislation stipulates that investment contracts require an investment in an enterprise, but not necessarily a common enterprise, as determined by Howey. The CLARITY Act establishes a definition for “investment contract assets,” which are digital asset commodities that are sold to raise capital, similar to what is currently considered an initial coin offering. These assets, under CLARITY, would be considered securities and fall under the SEC's purview.

Expert Commentary

“It would be a disaster if the majority were to rush the process,” said Sen. Mark Warner (D-Va.). “Market structure is exponentially more difficult than stablecoins.”

Senator Elizabeth Warren's staff issued a fact sheet stating that the “Republican crypto market structure bill threatens Americans' retirement savings, increases chances of a financial meltdown, fails to address illicit finance risks and presidential corruption, and leaves crypto investors vulnerable.”

Jake Chervinsky, a lawyer and crypto expert, raised concerns that the Trump-related crypto company, World Liberty Financial, will create conflicts of interest, with many unwilling to support legislation tied to the President's personal financial interests.

Broader Context

The U.S. crypto landscape has undergone a major regulatory transformation in mid-2025, driven by the Trump administration's push to create a clearer federal framework for digital assets. This coordinated legislative effort, dubbed "Crypto Week" led to the passage of landmark laws and the circulation of new Senate proposals that aim to define how digital assets are regulated nationwide. The initiative reflects growing political will to catch up with more developed regimes in the EU and UK, which have already enacted comprehensive crypto legislation focused on market integrity, investor protection, and innovation.

Several bills have already been signed into law, including the GENIUS Act, representing the first comprehensive federal law regulating payment stablecoins. The GENIUS Act requires stablecoins to be backed 1:1 by high-quality liquid assets, specifically U.S. dollars or short-term Treasuries. Issuers are required to publish monthly reserve reports, subject to attestation by an independent auditor. Only federally insured depository institutions, national trust banks, or state-chartered trust companies meeting specified standards may issue qualifying stablecoins. All issuers must comply with Bank Secrecy Act and anti-money laundering obligations, including KYC and suspicious activity reporting. Stablecoins may not offer yield or interest to stablecoin holders.

With the GENIUS Act now law and both the Clarity Act and Anti-CBDC bill pending in the Senate, 2025 marks a pivotal year for digital asset regulation. The federal framework for crypto is becoming more defined, though open questions remain around consumer protection, executive branch conflicts of interest, and comprehensive tax treatment.