Senate Agriculture Committee Releases Draft Bill Outlining CFTC’s Role In Regulating The Crypto Spot Market
Key Takeaways:
- The U.S. Senate Agriculture Committee has released a discussion draft on the crypto market structure bill, assigning the Commodity Futures Trading Commission (CFTC) as the regulatory agency with authority over crypto spot trading.
- Committee chair, Sen. John Boozman, believes the CFTC is the right agency to regulate the spot market, while Sen. Cory Booker, co-author of the draft, said the CLARITY Act would provide the agency with regulatory authority, ensure consumer protection, and oversee the growing industry.
- The Congress will have the authority to set regulatory limits for the SEC and CFTC over the crypto market.
- The CLARITY Act was passed in the House in July, but a Senate vote has been delayed until the Agriculture Committee’s crypto guidance for the CFTC and the Banking Committee’s guidance for the SEC are approved.
The U.S. Senate Agriculture Committee has released a draft of the crypto market structure bill that outlines the regulatory jurisdiction of the country’s two main financial market watchdogs: the Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC).
This move brings Congress one step closer to passing the landmark legislation that dictates how the crypto sector will be regulated in the United States.
Senate Agriculture Committee Outlines Regulatory Powers of the CFTC Under the Proposed Crypto Market Structure Bill – CLARITY Act
Senators John Boozman, chair of the Committee, and Cory Booker introduced the bipartisan proposal on Monday following months of discussions. The draft expands upon the CLARITY Act, which passed in the House in July, and includes brackets around sections that lawmakers are still negotiating.
The draft legislation aims to outline the regulatory powers and limits of the SEC and CFTC when it comes to handling crypto assets. It defines digital commodities, which are cryptocurrencies issued on public blockchains, as “any fungible digital asset that can be exclusively possessed and transferred, person to person, without necessary reliance on an intermediary, and is recorded on a cryptographically secured public distributed ledger.”
Only Congress has the authority to set the regulatory boundaries of agencies overseeing the crypt market, and both the SEC and CFTC have shared guidance to crypto firms about the industry’s position under the Trump White House.
CFTC Will Be In Charge of Regulating The Crypto Spot Market, and Ensuring Compliance and Consumer Protection
Boozman stated that the CFTC is the “right agency” to regulate spot crypto trading, and is “essential” for establishing clear rules for the emerging market while also protecting consumers. He noted that the crypto market structure bill discussion draft “advances those goals” and lays an important marker as the group works toward “final policy language.”
Meanwhile, Booker added that the upcoming bill would provide the CFTC with “new authority” to regulate the digital commodity spot market, create new protections for retail customers, and ensure that the agency has the personnel and resources necessary to oversee the “growing market.”
The bill also proposes a dedicated CFTC funding stream for its new spot market regime, which could take effect 270 days after the CLARITY Act is signed into law. There will be a transition period allowing existing service providers to continue operations while awaiting registration.
The draft outlines common crypto terms such as blockchain, decentralized finance, and decentralized autonomous organizations, and how they would be regulated under the Commodity Exchange Act.
The Senate Agriculture Committee Oversees the CFTC, and the Senate Banking Committee Oversees the SEC
Much of the document is still in brackets, as those provisions are subject to change following further discussions. One part mentions that Democrat lawmakers – “minority view” – within the Senate Agriculture Committee believe it does not have jurisdiction over certain aspects of the crypto industry, and want to work with the Senate Banking Committee to address issues related to “noncontrolling” blockchain developers and providers of blockchain-related services.
The Agricultural Committee has jurisdiction over the CFTC, while the Banking Committee oversees the SEC. The former’s role in the derivatives market traces back to its 19th-century oversight of farm commodities. As futures markets expanded to meet rising investor demand, Congress passed the Grain Futures Act of 1922 and the Commodity Exchange Act of 1936, placing federal derivatives regulation under the Agriculture Committee’s authority.
The CFTC, established under those guidelines in 1974, already regulates Bitcoin and other crypto commodities, but only in their derivatives form. The new draft seeks to expand the agency’s oversight to spot trading, where the majority of retail activity takes place.
The proposal requires major crypto spot trading platforms to register with the CFTC and adopt anti-fraud, recordkeeping, fund-segregation, and dispute-resolution measures. Brokers and dealers would follow a different set of registration rules, but the agency’s exemption powers are still under debate.
Market Experts Welcome the U.S. Crypto Market Structure Bill
Ji Hun Kim, CEO of crypto advocacy group the Crypto Council for Innovation, said the draft bill marks “meaningful positive” progress toward establishing a comprehensive, “fit-for-purpose” market structure framework for crypto assets in the US.
Bill Hughes, senior counsel and director of global regulatory matters at ConsenSys, wrote in a Monday X post that the draft “explicitly” protects the self-custody right of crypto holders. He argued that it allows individuals to hold and transact cryptocurrencies directly via hardware or software wallets, and shields developers from being treated as “money transmitters” for publishing code or running crypto infrastructure. However, he warned that the legislation is “not a safe harbor” for DeFi platforms that are currently in operation.
Mason Lynaugh, community director at Coinbase’s crypto lobbying arm, Stand with Crypto, stated that the draft bill is an “important step” toward establishing a “common sense” regulatory framework that the industry has been pushing for. He urged the Senate to act “quickly” and “deliberately” to pass the market structure legislation, claiming that crypto advocates nationwide are counting on their elected officials to “create clear rules of the road.”
The Agriculture Committee’s draft will advance alongside the Banking Committee’s suggestions on the SEC’s crypto market oversight, with the provision then added to the CLARITY Act’s final draft.
The proposals require coordination from the CFTC and SEC and approval from both committees before a Senate vote. However, the timeline for Senate passage remains uncertain, with the deadline shifting from August to September, and now to the end of the year.
Also Read: Uniswap Explodes Above $8.47 Amid the Announcement of New Governance Proposal
