U.S. House of Representatives members introduce a new cryptocurrency regulation bill｜First definitions of the roles and terms of SEC and CFTC

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The main points of this article

• The U.S. House of Representatives clarifies the jurisdiction of the SEC and CFTC over cryptocurrency regulation.
• Initial definitions of terms such as digital assets and digital goods
• Clearly state that DeFi and self-custody are not subject to regulation.
• Stablecoin regulations are under continued discussion in a separate bill.

Table of Contents* 1. The U.S. House of Representatives Proposes Division of Jurisdiction between SEC and CFTC

• 2. New Standards for Cryptocurrency Regulation Set by the U.S.

• 2.1. Definition of Terms in the Digital Asset Market Structure Bill
• 2.2. Clarification of the roles of the SEC and CFTC - 2.2.1. Clarification of the supervisory scope of the SEC and CFTC - 2.2.2. Definition of Decentralization and Maturity
• 2.3. Exchange and Custodian Regulation and Considerations for DeFi - 2.3.1. New Registration System for Intermediaries - 2.3.2. DeFi・Regulatory Exemption for Self-Custody
• 2.4. Regulatory Policy for Stablecoins

• 3. Expectations and Concerns Regarding US Cryptocurrency Regulations

• 3.1. Regulatory Assessment Demonstrated by Renowned Investors
• 3.2. Cautious stance and political conflict from the Democratic Party side

• 4. Accelerating discussions on cryptocurrency regulation enhancement in the United States, with bill passage on the horizon.

The U.S. House Proposes Division of Jurisdiction Between SEC and CFTC

Chairman French Hill (Republican) of the House Financial Services Committee, along with the Agriculture Committee, submitted a discussion draft of a bill concerning the market structure of virtual currencies (crypto assets) on May 5, 2025.

This draft aims to clarify the jurisdiction of the SEC (U.S. Securities and Exchange Commission) and the CFTC (Commodity Futures Trading Commission) and to introduce legal definitions for important terms in the cryptocurrency and blockchain market for the first time.

The draft was presented by four lawmakers, including Hill Financial Services Committee Chair and G.T. Thompson, Chair of the Agriculture Committee (Republican), who explained, "This bill brings clarity to the regulations necessary in the world of digital assets, supporting the healthy development of the market while protecting consumers."

This discussion draft was submitted in preparation for the joint hearing on digital assets scheduled for May 6 in the House of Representatives. In the future, we plan to finalize the proposal based on feedback gathered from industry stakeholders and experts.

Chairman Hill stated, "This draft is the first step towards bringing long-term stability to the U.S. cryptocurrency market," and the committee aims to refine the bill in a bipartisan manner while incorporating public opinions, ultimately seeking the President's signature.

New Standards for Cryptocurrency Regulation Indicated by the United States

Definition of Terms in the Digital Asset Market Structure Bill

The draft bill on the structure of the digital asset market released this time clearly defines important concepts such as "digital assets", "digital goods", "blockchain systems", "decentralized governance", and "mature blockchain systems" for the first time.

For example, "digital assets" are defined as "the digital representation of value recorded on a distributed ledger using cryptographic technology in general," and "digital goods" refers to cryptocurrencies such as Bitcoin (BTC) that are subject to the Commodity Exchange Act.

Additionally, it has been clearly indicated that the distribution to network participants, such as rewards from mining and staking (user distribution), does not constitute the sale of securities.

Clarifying the roles of the SEC and CFTC

Clarification of the supervisory scope of the SEC and CFTC

The draft clearly delineates the supervisory scope of the SEC and CFTC. The SEC oversees virtual currencies that have the nature of investment contracts (security tokens) and applies securities law regulations such as registration and information disclosure.

On the other hand, the CFTC will be responsible for "digital commodities" that do not qualify as securities, and will monitor their spot market transactions.

This draft bill is formulated in line with the "FIT21 Bill" that passed the House of Representatives in 2023 but was stalled. It incorporates the concept that "digital goods are primarily under the jurisdiction of the CFTC, and until the decentralization of the network is achieved, the SEC will also be involved," which was a topic of discussion at that time.

This approach aims to provide a legal demarcation of the jurisdictional boundaries between securities and commodities, which have been previously unclear.

Definition of Decentralization and Maturity

Additionally, specific criteria are provided to determine how decentralized (non-centralized) the blockchain is and to what extent it has matured.

The draft states that a certain blockchain project considers "a state where a specific company or individual cannot control it alone" as a condition for decentralization. For example, if one organization or individual holds more than 10% of the total tokens, they are obliged to disclose this information, making it clear that it is a centralized management structure.

Additionally, a mature blockchain system is defined as one that "has real use cases, sufficient development and operational track records, operates under fair and transparent rules, and is no longer in a centrally managed state."

If these criteria are met, tokens that were initially considered securities may fall outside the framework of securities law and be treated as digital goods.

Exchange and Custodian Regulations and Considerations for DeFi

New Registration System for Intermediaries

Furthermore, the draft also stipulates a new registration system for intermediaries in cryptocurrency transactions.

The CFTC is establishing a registration system for exchanges, brokers, and sellers that handle digital commodities, while the SEC is being asked to create regulations regarding alternative trading systems (ATS) and asset managers (custodians) for tokens that have a securities-like nature.

This will result in exchanges and custodians handling virtual currencies being subject to clear registration and reporting obligations under the Commodity Futures Act and the Securities Act, which is expected to enhance market transparency.

Furthermore, it is clearly stated that transactions in the secondary market for digital goods are not regulated as an "investment contract" under securities law if buyers do not receive profit distributions or ownership interests in the business.

DeFi - Exemption from Self-Custody Regulations

This draft also includes considerations for decentralized finance (DeFi) and self-custody methods for managing assets.

It has been clarified that the mechanism of DeFi, which automatically executes transactions through smart contracts without going through a central authority, is not subject to the application of traditional securities laws or commodity exchange laws.

Specifically, pure blockchain services that facilitate transactions without holding user assets by a third party do not qualify as exchanges or brokers.

Additionally, there is a provision that prohibits the Ministry of Finance and the Financial Crimes Enforcement Network (FinCEN) from creating regulations that impose restrictions on the self-management of individuals' cryptocurrency wallets, indicating a policy to protect users' rights to manage their own assets under national law.

Stablecoin regulation policy

In addition, definitions regarding the handling of stablecoins have been provided.

This draft indicates a policy of defining "settlement stablecoins" as a type of digital asset while not classifying them as securities.

However, the regulatory framework for stablecoins is being discussed separately, and this draft does not include detailed regulatory content.

The House Financial Services Committee already passed the "STABLE Act" stablecoin regulation bill in March, and a bipartisan "GENIUS Act" is being discussed in the Senate.

Discussions on stablecoin regulation are ongoing between the ruling and opposition parties, and the future developments alongside this draft are being closely watched.

Expectations and Concerns Regarding US Cryptocurrency Regulations

The industry has generally welcomed this draft proposal.

Regulatory Assessment Indicated by Prominent Investors

Justin Slaughter, the legal officer of the cryptocurrency investment company Paradigm, stated on X (formerly Twitter) that "this bill returns the regulatory leadership of cryptocurrencies to the CFTC," while also expressing the view that "the SEC will also retain its supervisory authority until blockchain is sufficiently decentralized."

Additionally, Matthew Siegel of the major asset management firm VanEck points out that this draft removes the restrictions on accredited investors (wealthy individuals) for cryptocurrency investments that were present in previous proposals, thereby opening the door for all individual investors to participate in the market.

The draft states that there will be no restrictions based on the income or net assets of investors when purchasing virtual currencies, and it is characterized by the fact that the "qualified investor requirements" required in traditional securities investments do not apply.

Cautious stance and political conflict from the Democratic Party side

On the other hand, a cautious stance is also being shown from the Democratic Party side.

Democratic chairwoman of the Financial Services Committee, Representative Waters, pointed out that "President Trump is involved in the cryptocurrency business through his own business, raising concerns about conflicts of interest in policy decisions" and has indicated her intention to miss the hearing on May 6.

During this hearing, some Democratic Party members stood up midway, highlighting the political divide surrounding cryptocurrency regulation.

Strengthening of Cryptocurrency Regulations in the U.S., Discussions Accelerate Towards Bill Passage

Despite the existing divisions among political parties, the discussions on cryptocurrency regulation are steadily progressing, and Senate Banking Committee Chairman Tim Scott (Republican) expresses confidence that the Market Structure Bill will be enacted by August this year.

In the United States, politicians and industry stakeholders are proactively advancing the creation of a regulatory framework, and movements toward the establishment of comprehensive cryptocurrency regulation laws are expected to accelerate further in the future.

Latest cryptocurrency news here

Source: Official announcement from the House Financial Services Committee

Writing and Translation: BITTIMES Editorial Department

Thumbnail: Used with permission from Shutterstock.