Democratic Senators Propose Digital Asset Market Framework

Democratic Senators released a framework for digital asset legislation "that would protect investors while providing a compliance pathway for digital asset businesses."

Put forward by Senators Mark Warner, Ruben Gallego, Kirsten Gillibrand, and others, the Senators underscored the urgency of establishing clear rules for digital assets. They stressed that bipartisan engagement will be essential to producing a durable, balanced legislative package capable of both protecting investors and fostering innovation.

The framework sets out seven principles:

1. Closing the Spot Market Gap. The proposed framework would grant the CFTC exclusive authority over non-security digital assets, require platform registration, and establish consumer protections and listing standards to prevent fraud and manipulation.
2. Clarifying Legal Status and Jurisdiction. The proposed framework would define when tokens are securities or commodities, create a process for regulatory determinations, and ensure consistent treatment while preserving state and CFPB authority.
3. Incorporating Issuers into Oversight. The proposed framework would require issuers to disclose governance, insider holdings, technology, and risks in plain language. It also proposes equipping the SEC with resources to enforce compliance.
4. Regulating Digital Asset Platforms. The proposed framework would subject platforms to exchange and broker rules covering custody, pricing, and conflicts of interest, while providing oversight of DeFi and prohibiting yield from stablecoin issuers.
5. Preventing Illicit Finance. The proposed framework would require platforms to register with FinCEN, comply with AML and sanctions rules, and prevent illicit use of DeFi or offshore entities to evade U.S. law.
6. Preventing Corruption and Abuse. The proposed framework would bar elected officials and their families from profiting from digital assets while in office, would mandate disclosure of holdings, and would require promoters to reveal compensation or stakes.
7. Ensuring Fair and Effective Regulation. The proposed framework would provide the SEC, CFTC, and Treasury with funding, hiring authority, and bipartisan leadership to ensure durable and legitimate rulemaking.