Tension in Washington is mounting as lawmakers prepare a crypto market structure bill. With the August recess approaching, conflicts within the industry are coming to the forefront.
Industry Divides Over Regulatory Issues
The proposed legislation from the House Financial Services and Agriculture Committees seeks to clarify which digital assets fall under securities or commodities law. However, internal disagreements within the crypto ecosystem and among regulatory bodies create deep uncertainty.
Central to the debate is the continued use of the Howey Test, a decades-old legal benchmark used by the SEC to classify securities. While SEC Commissioner Caroline Crenshaw and former Internet Enforcement Chief John Reed Stark have defended the test, critics argue it is ill-suited for blockchain-based technologies.
New SEC Chairman Paul Atkins and several Republican lawmakers are pushing for regulatory reforms they believe would better support innovation. Their efforts reflect growing concern that the current framework could stifle industry development.
Support for Decentralization from Key Players
Another approach gaining traction is the 'ancillary asset' model, advocated by attorneys like Lewis Cohen. This proposal treats initial token sales as securities offerings while potentially exempting secondary trading.
Multiple major crypto organizations, including Coinbase and a16z Crypto, support using decentralization as their proposed regulatory framework. According to their opinion, security laws must not apply to tokens that exist on sufficiently decentralized networks. This perspective draws support from a 2018 speech by former SEC Director William Hinman, who stated that Ethereum was no longer considered a security.
Future of Crypto Regulation
A new formal decentralized testing method is under development to differentiate between public blockchain projects and centralized token companies. Commissioner Hester Peirce has publicly endorsed the proposed decentralization test, which emphasizes the need for regulatory certainty.
Preparations are underway as industry groups draft responses ahead of a joint hearing scheduled for May 6. The bill, which may draw from last year’s FIT21 Act, is expected to shape future rulemaking by the SEC and CFTC.
With lawmakers pushing forward and key players resisting, the stage is set for a heated regulatory battle. The outcome could redefine how digital assets are treated across U.S. financial markets.
