U.S. House Hearing Advances Crypto Market-Structure Legislation

Key Points:

• The House Financial Services Committee's digital assets subcommittee held a hearing to discuss potential crypto market-structure legislation, the second of two major crypto initiatives supported by President Donald Trump and his allies.

• Democrats aimed to spotlight the president's involvement in crypto businesses.

• Representative French Hill, chair of the committee, indicated that a bill on market structure would be introduced soon.

• Later on Wednesday, a subcommittee of the House Agriculture Committee also held a related hearing on crypto market structure.

The U.S. House Financial Services Committee took another step toward advancing what Representative Bryan Steil described as the "second half" of President Donald Trump's crypto agenda: a bill to establish U.S. crypto market regulations for a fully regulated domestic industry.

Steil, the Republican chairman of the crypto subcommittee, stated that the first part of Trump's plan, the stablecoin legislation, is already making progress in both the House and Senate. The Wednesday hearing focused on the other key digital assets bill aimed at creating a framework for crypto markets, marking an important stage in its journey through Congress.

Representative French Hill, the Arkansas Republican leading the overall committee, suggested that those working on the bill are nearing the release of a successor to the Financial Innovation and Technology for the 21st Century Act (FIT21), the House legislation that passed last year but did not move forward in the Senate.

During the hearing, Representative French Hill stated, "The committee has engaged with a wide range of stakeholders, from government agencies to leaders in the ecosystem, to identify ways to further refine and strengthen market structure legislation. We're actively working on releasing a legislative discussion draft that reflects feedback from members and market participants."

Democrats on the committee repeatedly focused on the crypto business activities of Trump and his family, questioning industry lawyers about potential conflicts of interest. Representative Maxine Waters, the committee's top Democrat, accused the panel of attempting to make Trump "the king of crypto" by passing legislation that would allow him to dominate the stablecoin market, replace George Washington on the dollar, and create his own stablecoin.

While most witnesses avoided commenting on Trump, Alexandra Thornton, a senior director at the Center for American Progress and a consumer advocate, noted that "many actions by the Trump administration favored crypto, including letting go of enforcement staff and dropping cases against crypto."

The lawmakers also discussed the appropriate roles of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) in overseeing the crypto industry, as well as how Congress should define which regulatory bodies should oversee different types of digital assets. The SEC's approach to using securities law to determine which crypto tokens qualify as securities has led to legal uncertainty and enforcement disputes, despite some early guidance on how to navigate legal standards.

Tiffany Smith, a lawyer at WilmerHale who works with crypto clients, noted that market participants still struggle to apply the SEC’s definitions, particularly as most crypto transactions occur on secondary markets like crypto exchanges. She emphasized, "Regulatory clarity is needed."

Later on Wednesday, the House Agriculture Committee's counterpart subcommittee held a related hearing, focused on advancing a market-structure bill. This committee oversees the CFTC, which is expected to play a leading role in regulating U.S. crypto transactions.