A newly released draft of the U.S. Senate’s long running crypto market structure legislation signals progress on some of the most contested issues in digital asset regulation, particularly stablecoin rewards and decentralized finance oversight. The updated text, filed by the U.S. Senate Banking Committee, reflects months of negotiations between lawmakers, regulators, banks, and crypto industry groups. At its core, the bill seeks to define how federal agencies such as the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission will supervise crypto markets. The document expands on earlier drafts by clarifying agency jurisdiction, addressing illicit finance concerns, and outlining rules for banking and responsible innovation. While the bill remains unfinished, its release ahead of a planned committee hearing marks a critical step toward establishing a comprehensive federal framework for digital assets after years of regulatory uncertainty.
One of the most closely watched sections addresses stablecoin rewards and yield, an issue that had stalled negotiations. The draft prohibits digital asset service providers from paying interest or yield that is solely tied to holding a payment stablecoin, regardless of whether compensation is offered in cash, tokens, or other forms. At the same time, it explicitly allows activity based rewards and incentives, including those linked to transactions or usage. This language reflects a compromise aimed at preventing stablecoins from functioning like interest bearing deposits while still allowing providers to design functional payment products. The provision draws on definitions from earlier stablecoin legislation and applies broadly to exchanges, custodians, and issuers. Industry participants view the wording as a balancing act that protects traditional banking models while preserving room for innovation in payments and settlement, even as questions remain about how activity based rewards will be interpreted in practice.
Beyond stablecoins, the draft introduces new elements for decentralized finance and token classification. It includes protections for DeFi developers intended to limit liability for individuals who write or maintain open source code without controlling user funds. The bill also revisits how digital assets are categorized under securities law, introducing concepts such as ancillary assets and network tokens. Certain widely traded cryptocurrencies, including those already included in exchange traded products, would not automatically be treated as securities under the proposed framework. Notably absent, however, are provisions addressing ethics concerns raised by some lawmakers regarding public officials’ involvement in crypto businesses. As the committee prepares for hearings and amendments, the bill’s current form highlights both progress and unresolved tensions. Its evolution will likely shape how stablecoins and DeFi integrate into U.S. financial markets in the years ahead.
