US Senate Banking crypto bill draft lands in Washington

A draft of the digital asset bill circulated in Washington late Monday seeks to change prohibitions by federal law that did not allow reserve banks to offer any digital asset service to an individual or institution. 

The Digital Asset Market Clarity Act was forwarded by the Senate Banking Committee member Senator Cynthia Lummis, the Wyoming Republican, and one of Congress’s most vocal advocates for crypto legislation. Pro-crypto lawmakers want to amend the Federal Reserve Act from barring central bank digital currencies for monetary policy purposes. 

According to the Crypto In America podcast host Eleanor Terrett, the bill proposes changes that would affect the Federal Reserve. The banks will not be able to offer certain products or services directly to individuals.

Senate Banking Committee adds two ethics languages in Clarity Act draft 

As seen in the 278-page draft shared by Terrett, there are two new provisions that fall under the Banking Committee’s jurisdiction, addressing felony convictions and insider trading. 

The sections located on pages 72 and 270 were initially left out of the documents that first arrived in Capitol Hill because ethics provisions reside with other congressional committees. They were not expected to appear in companion legislation released elsewhere.

Senator Lummis and her colleagues have also proposed a compromise between decentralized finance and traditional finance interests in Section 601, which talks about protections for software developers, also known as the Blockchain Regulatory Certainty Act (BRCA).

Sources familiar with the talks said an agreement was reached this week after tense private meetings held the previous week. Banking institutions and opponents of the Clarity Act, including securities trade associations such as SIFMA, were concerned that DeFi protocols have financial “loopholes” that could favour their operations over tradfi.

“After months of hard work, we have bipartisan text ready for Thursday’s markup. I urge my Democrat colleagues: don’t retreat from our progress. The Digital Asset Market Clarity Act will provide the clarity needed to keep innovation in the US & protect consumers. Let’s do this!” Lummis wrote on X, sharing two snapshots of the in-progress draft.

Clarity Act defines ancillary assets and early-stage tokens

The markup categorizes several tokens issued during early-stage blockchain fundraising that later become network tokens. While the draft claims these assets are not securities in secondary market trading, an ancillary asset “shall be treated as a covered security” for purposes of federal preemption. Issuers and related parties will still have to make detailed disclosures during initial transactions.

The plan says that the SEC would require disclosures about the token supply, governance rights, technical capabilities, and those who are connected to the token. The declared goal is to “protect investors, promote capital formation, and keep markets fair and orderly.” It will also keep an eye on “privatized” token launches and insider self-dealing.

Section 103 expands this framework by granting the SEC authority to craft exemptions and customized rules for ancillary asset transactions. Assets sold under a new Regulation Crypto framework could qualify for exemptions that override state securities laws. However, the SEC would retain the discretion to determine which transactions qualify and under what terms.

Blockchain developer protection through BRCA

In the sixth title of the bill, which majorly defines the Blockchain Regulatory Certainty Act, states that a “non-controlling developer or provider” of distributed ledger services “shall not be treated as a money transmitting business.”

The protection does not extend to developers who retain operational control.

Section 602 declares that the offer or sale of an NFT “shall not be deemed to constitute an offer or sale of a security” unless it satisfies all elements of an investment contract. Non-fungible tokens can be used as collectibles, access credentials, or membership rights. However, according to the Banking Committee, they “do not become securities solely because they may appreciate in value.”

The Joint Advisory Committee on Digital Assets and directs agencies are to formalize work through an MoU. It authorizes significant funding increases for FinCEN. It includes $30 million annually from fiscal year 2026 through 2030. There is also an incentive pay of up to 20 percent for recruiting qualified personnel.

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