The United States Senate is making strides in shaping the future of cryptocurrency regulation, with a new draft bill circulating that could significantly impact the industry. This latest version of the legislation, which emerged privately last Friday, seeks to provide a clearer framework for the regulation of crypto markets in the U.S., addressing key issues such as legal protections for developers, bankruptcy guidelines for digital asset issuers, and the role of federal regulators in tokenization.
A Step Forward in Crypto Regulation
For the past few years, the U.S. has been grappling with how to effectively regulate the burgeoning crypto industry. The House of Representatives took a significant step earlier this year by passing the Digital Asset Market Clarity Act, a bill that laid the groundwork for regulatory standards. However, the Senate is now poised to take the lead with its own version, which is expected to be more comprehensive and ultimately more influential.
The newly obtained draft, reportedly lengthier than previous versions, seeks to establish robust legal protections for those involved in the development and distribution of distributed ledger systems or decentralized finance messaging systems. This is a crucial development for the crypto community, which has long advocated for clearer legal guidelines to protect developers and innovators from potential legal repercussions.
Bankruptcy and Tokenization: Key Focus Areas
One of the standout features of the new draft is its approach to bankruptcy procedures for digital asset issuers. By amending existing laws, the bill aims to clarify that ancillary assets and digital commodities should be treated as customer property during bankruptcy processes. This provision is designed to safeguard the interests of investors and customers, ensuring that their assets are protected in the event of an issuer’s financial collapse.
Another significant aspect of the bill is its focus on tokenization—the process of converting rights to an asset into a digital token on a blockchain. The draft calls for a joint study by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) to explore the tokenization of securities and other real-world assets. The goal is to develop standards for third-party custodians handling tokenized assets and to establish clear regulatory pathways if needed.
Interestingly, the draft stipulates that tokenized securities should still be treated as securities, while tokenized real-world assets that aren’t securities shouldn’t be classified as such simply because they’re tokenized. This nuanced approach aims to provide clarity and prevent unnecessary regulatory burdens on tokenized assets.
The Political Landscape and Challenges Ahead
While the new draft is a promising step forward, its path to becoming law is fraught with political challenges. The bill is primarily backed by key Republicans on the Senate Banking Committee, and its success hinges on gaining support from Democrats and the Senate Agriculture Committee. The House’s Clarity Act, which passed with strong bipartisan support, provides a hopeful precedent. However, the Senate’s requirement for a 60-vote majority means Republican leaders must secure several Democratic votes to push the bill through.
Reflecting on past legislative efforts, such as the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, offers some insight into the Senate’s strategy. When that bill reached the House, then-President Donald Trump advocated for its passage without amendments, which ultimately resulted in a significant policy win for the crypto industry. This history underscores the importance of strategic collaboration between the two chambers.
Timing and Next Steps
The timing of the Senate’s work remains uncertain. Originally, Trump had called for completion by August, a deadline that has since passed. Senate Banking Committee Chairman Tim Scott later set a target for September 30, expressing confidence in its achievability. Senator Cynthia Lummis, a key figure in the Senate’s crypto subcommittee, has suggested that the bill could be signed by Thanksgiving.
As Congress returns from its August break, the legislative agenda is packed with budgetary demands and other pressing issues. Nonetheless, crypto regulation remains a top priority, with bipartisan support continuing to bolster its prospects. The Senate Banking Committee has already laid the groundwork with initial priorities, hearings, and a discussion draft released in July to solicit feedback from stakeholders.
The next step for this draft is likely a markup hearing, where senators can propose amendments, followed by a Senate floor vote requiring a 60-vote majority to advance. Democratic backing will be crucial, and the bill may undergo further revisions to incorporate their proposals.
Ultimately, for the bill to become law, it must pass both the Senate and the House. Given the strong support for the Clarity Act in the House, there’s optimism that this new version could clear that chamber as well, paving the way for a landmark regulatory framework for the crypto industry in the U.S.
As the Senate continues to refine this pivotal piece of legislation, stakeholders in the crypto industry are watching closely, hopeful that it will provide the clarity and stability needed for the sector to thrive.
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.
