With support from both sides of the aisle, Senate agriculture leaders have introduced a bill to put crypto spot markets under the oversight of the Commodity Futures Trading Commission.

On Monday, the committee chairman, John Boozman, and Senator Cory Booker unveiled the proposal, which builds upon the CLARITY Act that cleared the House earlier this year.

Key proposals in the draft bill include a formal registration process for crypto trading platforms and new consumer protection rules.

The bill describes digital commodities as any “fungible digital asset that can be exclusively possessed and transferred, person to person, without necessary reliance on an intermediary, and is recorded on a cryptographically secured public distributed ledger.”

Crypto trading under the CFTC’s watch 

Under the proposed framework, digital commodity exchanges would be required to maintain “customer fund segregation requirements,” implement “conflict of interest safeguards,” and establish appropriate “customer disclosure requirements” along with “dispute resolution processes” to better protect retail participants, the committee explained in a separate statement.

Brokers and dealers operating in the spot market would be required to register separately as “digital commodity brokers” or “digital commodity dealers,” depending on their activities, and comply with requirements to use “qualified digital commodity custodians” when holding customer assets. 

The draft includes bracketed options for exemptions, with provisions still under discussion regarding limited exemptions for “eligible contract participant activities” and rules the CFTC may issue to “effectuate the protection of customer assets.”

Lastly, the draft also calls for interagency cooperation between the CFTC and the Securities and Exchange Commission.

According to Boozman, the CFTC “is the right agency to regulate spot digital commodity trading, and it is essential to establish clear rules for the emerging crypto market while also protecting consumers.”

“This bipartisan discussion draft would provide the CFTC with new authority to regulate the digital commodity spot market, create new protections for retail customers, and ensure the agency has the personnel and resources necessary to oversee this growing market,” he added.

However, the draft is yet to resolve key questions around DeFi oversight, anti-money laundering obligations, the scope of CFTC discretion, and how to strike a balance with industry safe harbors, with several sections still bracketed and marked as “seeking further feedback.”

Boozman has acknowledged this and said the draft was a “first step,” noting that more work is needed before the legislation can advance out of committee and reach the Senate floor.

Crypto industry reacts positively

Crypto proponents have largely supported the draft, especially as it protects self-custody rights and allows individuals to “engage in direct, peer-to-peer, lawful transactions” without relying on intermediaries. See below.

The bill further clarifies a highly anticipated provision for developers and infrastructure providers, stating they “shall not be treated as a money transmitter” solely for “creating or publishing software” or “providing infrastructure support to maintain a blockchain service,” as long as they do not “control, initiate upon demand, or effectuate transactions” involving user assets.

“This is the first time U.S. law has formally acknowledged Bitcoin’s sovereignty principles. Huge win,” well-followed market commentator Adam Livingstone wrote in a Nov. 11 X post. 

According to Kadan Stadelmann, Chief Technology Officer at Komodo Platform, the bill represents a turning point in how digital assets are treated at the federal level and could bring long-awaited clarity.

“This bill would be a significant development after the crypto industry’s complicated relationship with the SEC. Whereas the CFTC views crypto as commodities, the SEC views many as unregistered securities–a stance that puts a thaw on innovation.”

“Most importantly, the bill enshrines self-custody rights, allowing people to use hardware and software wallets to hold their own Bitcoin and not be viewed as money transmitters under the law,” Stadelmann told crypto.news.