A new draft bill introduced by House Republicans on May 5, 2025, is poised to shake up the cryptocurrency landscape, aiming to dilute the influence of major crypto players while fostering broader market engagement. This move, according to Paradigm’s Vice President of Regulatory Affairs, Justin Slaughter, is a significant revision of the Financial Innovation and Technology for the 21st Century Act (FIT21).
A Shift Towards Decentralization
The “Digital Asset Market Structure Discussion Draft” appears to be a structured attempt to balance the scales in the crypto world. Under the lead of House agricultural and financial services committee chairs Glenn Thompson and French Hill, the draft redefines an affiliated person as anyone holding more than 1% of a digital commodity from a project, a stark reduction from the previous 5% threshold set by FIT21. Slaughter notes this adjustment as a critical step towards reducing the dominance of large firms, potentially increasing smaller players’ participation in the market.
“This is a portent of the entire bill,” Slaughter commented in a May 5 X post. “There are often criticisms of crypto being too dominated by a few large firms. This bill makes clear the regulatory regime proposed is going to push against that fact and strongly encourage more small-d ‘democratization’ of the space.”
Moreover, the draft outlines what constitutes a “mature blockchain system,” requiring it not to be under the common control of any individual or group. Until such decentralization is achieved, the Securities and Exchange Commission (SEC) would oversee these networks, highlighting a nuanced approach to regulation. For a deeper dive into the regulatory implications, see our coverage of the SEC’s latest guidance.
Redefining Crypto Assets
The draft also ventures into defining decentralized finance (DeFi) protocols as those permitting user-directed financial transactions, exempting them from registering as digital commodity brokers or dealers. This classification could pave the way for simpler regulatory processes for DeFi platforms.
Interestingly, the draft introduces the term “investment contract assets” for digital commodities, separating them from traditional assets like stocks under the Howey test. According to Slaughter, securities laws won’t trigger unless token sales involve ownership or profit transfers in the underlying business—a provision that could offer clarity to many crypto firms caught in the regulatory crosshairs.
House committee members assert that this bill provides a “clear process” for firms to register their digital commodities with the Commodity Futures Trading Commission, alongside opportunities to raise funds under SEC oversight. Joint rulemaking by the CFTC and SEC is mandated for delisting non-compliant registered assets, marking a step towards a coordinated regulatory approach.
Political Tensions and Future Prospects
However, the road to consensus is fraught with political hurdles. House Financial Services Committee Ranking Member Maxine Waters reportedly plans to thwart a Republican-led event on May 6 discussing this very draft, citing procedural agreements among committee members as a prerequisite for such hearings. This reflects the broader context of legislative challenges, as explored in U.S. Congress Braces for Intense Debate Over Crypto Legislation This Summer.
Despite the political friction, the Republicans are optimistic about the draft’s potential to anchor the US as a leader in digital asset innovation. They criticize past administrations for a regulation-by-enforcement approach, arguing for clear, rule-based governance that prevents the exodus of crypto businesses to jurisdictions with more defined regulatory frameworks.
“America needs to be the powerhouse for digital asset investment and innovation. For that to happen, we need a commonsense regulatory regime,” remarked Dusty Johnson, chairman of the subcommittee on commodity markets, digital assets, and rural development.
Slaughter encapsulated the sentiment: “This is the bill that will, finally, provide a clear regulatory regime on crypto that many have been calling for.”
As the draft traverses the legislative process, its capacity to reshape the crypto regulatory landscape and encourage a more inclusive market remains a subject of keen interest—and perhaps, cautious optimism—in the crypto community. Whether it will overcome political barriers and deliver on its promise is a question that will unfold in the coming months.
Source
This article is based on: New crypto bill draft seen to curb big crypto firm influence
Further Reading
Deepen your understanding with these related articles:
- The SEC Can Learn From the IRS in Making Regulation Simpler for Crypto
- US crypto groups urge SEC for clarity on staking
- Crypto Coalition Tells SEC Staking Is ‘Essential Good,’ Not a Security
Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
