Senate Advances Crypto Legislation: Developer Protections & Bankruptcy Rules
Senate Drafts Comprehensive Crypto Legislation
The U.S. Senate is progressing on legislation designed to establish a regulatory framework for cryptocurrency markets. A new draft bill has been privately circulated, outlining key provisions for crypto developers, bankruptcy procedures, and the tokenization of assets.
While the House of Representatives previously passed the Digital Asset Market Clarity Act, the Senate is taking the lead with its own version, expected to be the primary policy considered for enactment.
Key Provisions of the Senate Bill
Developer Protections
The draft legislation provides legal protections for individuals and entities involved in:
- Developing
- Publishing
- Constituting
- Administering
- Maintaining
- Distributing a distributed ledger system or a decentralized finance messaging system
Bankruptcy Guidelines
The bill amends existing bankruptcy law to account for ancillary assets. It clarifies that ancillary assets and digital commodities will be treated as customer property during bankruptcy proceedings.
Tokenization Study
The bill proposes a joint study by the SEC and CFTC on the tokenization of securities and real-world assets. This study aims to develop standards for:
- Third-party custodians handling tokenized assets
- Standards for the tokenized assets themselves
Following the study, the agencies could implement tailored regulatory pathways through the rulemaking process.
Tokenized Assets Classification
The bill specifies that tokenized securities will continue to be treated as securities. However, tokenized real-world assets that are not securities should not be classified as securities simply because they are tokenized.
Path to Enactment
The bill's future depends on securing bipartisan support, particularly from Democrats in the Senate Banking Committee and the Senate Agriculture Committee.
The process includes a markup hearing, where amendments may be introduced, followed by a Senate floor vote requiring 60 votes to pass.
Looking Ahead
The Senate's advancements come after the House passed the Clarity Act with significant bipartisan support. Differences between the two chambers' approaches remain, particularly regarding the transition of crypto assets between security and commodity classifications.
Uncertainty persists regarding the timeline for the Senate's actions, with previous deadlines having passed. The Senate Banking Committee is aiming for progress, but further revisions are expected to gain broader support.