House Crypto Draft: Digital Assets Defined Clearly, Regulatory Gaps Need to Be Filled

Source: Blockchain Knights

On May 5, leaders of the U.S. House Financial Services Committee and the Agriculture Committee released a discussion draft outlining a federal framework for regulating the U.S. Crypto asset industry.

House Financial Services Committee Chairman French Hill (Republican, from Arkansas), Agriculture Committee Chairman Glenn "G.T." Thompson (Republican, from Pennsylvania), Financial Services Committee Digital Assets Subcommittee Chairman Bryan Steil (Republican, from Wisconsin), and Agriculture Committee Commodity Markets Subcommittee Chairman Dusty Johnson (Republican, from South Dakota) jointly released the draft legislation.

These lawmakers emphasized that the bill aims to coordinate regulatory responsibilities between the SEC and the Commodity Futures Trading Commission (CFTC), while providing legal definitions for key terms in the blockchain and Crypto asset markets.

“This discussion draft builds on bipartisan, bicameral progress made in the 118th Congress and provides an enduring framework for protecting consumers and maintaining American leadership in digital innovation,” Chairman Hill said, adding that the Committee intends to incorporate public feedback and work with the Donald Trump Administration to advance the final bill.

Digital Asset Classification

The legislation introduces definitions of core industry concepts, including digital commodities, blockchain systems, decentralized governance, permissioned stablecoins, and mature blockchain systems.

In addition, the draft clarifies that distributions made through mining, staking, or user rewards, known as “end-user distributions,” are neither securities nor sales under current law.

Chairman Thompson stressed the urgency of legislative clarity, noting that the proposed framework would fill a regulatory gap and provide developers and users with the certainty they have long called for.

The draft sets out a registration path for digital commodity exchanges, brokers, and dealers under the supervision of the CFTC, while allowing the SEC to retain jurisdiction over securities and certain hybrid assets. Entities that engage in custody functions, facilitate transactions, or interact with customers must follow newly defined registration and disclosure procedures.

Subcommittee Chairman Steil said: "This is the beginning of a golden age for digital assets, and the House is leading the way."

Johnson agreed, saying that the United States must provide a common-sense regulatory system to continue to maintain its position as a global center for Crypto asset investment and innovation.

The draft also retains protections for DeFi protocols and self-custody. It states that as long as DeFi trading protocols and messaging systems do not hold custody or exercise discretion over user funds, they do not need to comply with traditional financial regulations.

The bill also prohibits the Treasury Department or the Financial Crimes Enforcement Network (FinCEN) from promulgating rules that restrict the ability of individuals to self-custody Crypto assets through wallets.

Start the legislative process

The committee has scheduled a joint hearing on May 6, titled "American Innovation and the Future of Digital Assets: A Blueprint for the 21st Century," to kick off formal legislative discussions and collect stakeholder input.

The draft includes provisions for joint rulemaking by the SEC and CFTC, as well as research on DeFi, NFTs, and blockchain infrastructure by expanding the federal agency's Office of Innovation.

By establishing legal definitions and clear jurisdictional boundaries, the proposed bill seeks to eliminate uncertainty regarding the regulation of Crypto assets in the United States while encouraging the responsible development and regulation of the digital asset market.