Momentum is building in Washington around legislation on crypto market structure, as two U.S. Senate committees prepare for votes this week that could mark a pivotal moment for crypto regulation.
The Senate Agriculture Committee and the Senate Banking Committee are expected to hold markup hearings on Jan. 15, during which lawmakers can amend the bills and vote on whether to advance them.
The legislation aims to clarify how crypto markets are regulated in the U.S., including how oversight would be split between the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC).
“This is an important step for the crypto industry to show bipartisan support for reform legislation, but the text of the final bill will be key,” Eli Cohen, Chief Legal Officer at Centrifuge, told The Defiant. “Will the bill ban third-party yield on stablecoins? If so, it would likely be better for the market if it fails.”
Cohen added that if the bill fails in either committee, market structure legislation is “likely to be dead for this session.” If the markups are successful, however, the two bills would be unified into a single text for a full Senate vote.
Some issues, including how yield-bearing stablecoins should be treated, are expected to be debated during the hearings, experts told The Defiant.
“Stablecoins that pay interest could be eliminated if Congress closes the current loophole preventing them from doing so,” Maghnus Mareneck, CEO and co-founder of Cosmos Labs, told The Defiant. “Crypto exchanges might be less favored in legislation over banks to operate, and privacy protocols will face more pressure with increased tracking activity.”
Mareneck noted that on the registration and licensing front, digital commodity exchanges, brokers and dealers would need to register with the CFTC, follow basic trade monitoring and reporting rules, and keep customer funds segregated – a requirement meant to prevent the kind of commingling seen in failures like FTX.
“Some areas remain unaffected, or slightly on the upwards trend like Layer 1 and infrastructure protocols, who will benefit from the demand driven by new TradFi adoption, but [it] will reshape competitive dynamics across the industry,” he added.
Hedy Wang, CEO and co-founder of Block Street, said that while the proposed rules would increase compliance burdens, they would also provide greater certainty. “[It may mean] more paperwork, reporting, risk controls, but it also gives legit projects confidence they’re not going to get reprimanded later.”
Wang also noted that there is a major debate over whether stricter rules will help or hinder innovation, particularly in decentralized finance (DeFi). “Personally, I think sensible clarity helps more than it hurts, because uncertainty has been the real limiting factor,” she said.