Despite approving a regulatory framework for stablecoins, lawmakers remain deeply engaged in crafting broader rules for cryptocurrencies.
From the Genius Act to Market Structure Legislation
Several months after July’s enactment of the Genius Act, which set baseline standards for issuing and using stablecoins, Congress is weighing the Clarity Act to define market structure for digital assets.
Roy Ben-Hur, who leads digital assets financial services at Deloitte, said the Guiding and Establishing National Innovation for U.S. Stablecoins (Genius) Act effectively recognizes stablecoins as an authorized payment method in the United States.
By contrast, the law known as the Digital Asset Market Clarity Act delineates when a token is treated as a security and when it is a digital commodity, said Deborah Kovsky-Apap, a partner at Troutman Pepper Locke. The measure largely allocates jurisdiction between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), and it is designed to set clearer definitions and compliance expectations for how digital assets are issued, traded, and overseen.
| Token Type | Regulator | Criteria for Classification |
|---|---|---|
| Security | SEC | Value is specifically linked to a particular company or issuer. |
| Digital Commodity | CFTC | Trades on open markets without a tie to a single company or issuer. |
Stablecoins are cryptocurrencies pegged to a fiat currency such as the U.S. dollar, a design intended to temper volatility compared with assets like Bitcoin.
House Action and Senate Review
The House of Representatives passed the Clarity Act in July, but it has not become law; two U.S. Senate committees are now taking it up for debate.
In Washington, market-structure bills often shift most during committee markups and any House-Senate negotiations, making the end state difficult to predict from early drafts.
Ben-Hur emphasized that the House and Senate drafts diverge, yet both would include:
- Disclosure standards for digital-asset traders.
- Registration requirements for digital-asset traders.
- Comparison to standards for other assets and commodities.
If an asset falls under the SEC’s remit, it would be categorized as an investment contract asset and become subject to the agency’s full oversight, he said.
Ben-Hur added that while the Genius Act focuses narrowly on stablecoins, the Clarity Act spans the wider universe of tokens, covering cryptocurrencies such as Bitcoin as well as stablecoins.
Who Regulates What: SEC or CFTC?
How will officials determine which digital currencies fall to the CFTC and which should be overseen by the SEC?
“It’s complex,” said Alejandro Latorre, a principal in Ernst & Young’s risk management advisory practice.
In brief, a series of tests sorts a given digital asset into the appropriate regulatory bucket, he said.
While those analyses can be dizzying, the gist is this: if a token’s value is specifically linked to a particular company, the SEC treats it as a security, Kovsky-Apap said.
Tokens and cryptocurrencies that trade openly on markets without a tie to a single company are, by contrast, more likely to be viewed as commodities, she said.
Applied to XRP, the framework would likely turn on whether regulators view XRP’s value and market activity as sufficiently tied to a single company or promoter, versus functioning as a widely traded token without that kind of linkage. If it were treated as a security, trading venues and intermediaries handling XRP could face SEC-style registration and disclosure obligations; if it were treated as a commodity, oversight would tend to shift toward CFTC-style market rules, potentially changing which compliance regime applies to platforms and products that list or reference XRP.
Kovsky-Apap also stressed that a cryptocurrency or stablecoin may not keep the same classification throughout its life cycle.
A token once tethered to a company’s value could be reclassified as a commodity if it becomes broadly available on public markets, she said.
Seeking Balance for Market Participants
According to Patrick Witt, executive director of the President’s Council of Advisors for Digital Assets, lawmakers are aiming for a regulatory “Goldilocks zone” with this bill.
He added at a March 2 panel at the Economic Club of New York that rules should be strict enough to give market participants the clarity they need to operate, but not so heavy-handed that they become a burden.
Political Fault Lines and Uncertain Outlook
Even so, it remains uncertain whether the proposal will be enacted.
Democratic critics have raised concerns that market-structure legislation could weaken investor protections, shift too much authority away from the SEC, and leave gaps in oversight for retail-facing crypto trading. Some also argue that tougher guardrails are needed around conflicts of interest, consumer disclosures, and enforcement tools before Congress expands a broader regulatory framework for the sector.
The effort is ensnared in a fight between crypto advocates and banks over whether digital currencies should offer yield akin to returns on Treasury bonds.
Kovsky-Apap described the stablecoin-yield dispute this way:
- Genius Act prohibits yields on stablecoins.
- Loopholes may permit yields.
- Clarity Act aims to close loopholes.
- Banks support closing loopholes.
- Crypto supporters oppose closing loopholes.
President Donald Trump set a March 1 deadline on social media for the two sides to strike a deal, but it passed without agreement, casting further doubt on the bill’s passage.