Original Title: 《5 Highlights from the U.S. Senate's Much-Hyped Crypto Market Structure Draft Bill》
Written by: Jack Inabinet
Translated and Compiled by: BitpushNews
The crypto market may finally be on the verge of receiving what it has long desired—a codified market structure law.
This is thanks to the release last night of the Digital Asset Market Clarity Act (DAMCA). The bill has garnered bipartisan support due to some noteworthy compromises regarding the future development of cryptocurrency in the U.S.
This 278-page document is the result of months of arduous negotiations among Senate Republicans, Democrats, and industry lobbyists.
It establishes a regulatory framework that divides the regulatory authority over digital assets between the U.S. Securities and Exchange Commission (SEC ) and the Commodity Futures Trading Commission (CFTC ).
The crypto community is sure to have mixed opinions on the provisions within. Paradigm's policy head, Justin Slaughter, called the bill a "significant victory for the Democratic members of the Senate Banking Committee," stating that this should have been passed during the Biden administration.
In this article, we will delve into five key provisions of the DAMCA to better understand the future evolution of transparency in the crypto market structure.
1. Prohibition on Stablecoin Yield Distribution
Under the Digital Asset Market Clarity Act, stablecoin issuers will be prohibited from distributing earnings to passive holders.
Chapter four of the DAMCA outlines the guidelines for regulated banking institutions interacting with digital assets. This chapter will prohibit stablecoin issuers (as defined in the GENIUS Act) from paying interest to holders.
While the DAMCA allows stablecoin issuers to distribute "rewards" tied to specific actions (such as account opening incentives or cash back), the fact remains that protecting stablecoin yields has long been a firm red line in the crypto industry. Strict limitations on stablecoins may leave crypto-native issuers at a long-term disadvantage when facing the banking sector.
Notably, several key players in the crypto industry, including Coinbase, surprisingly support the provisions in the bill that restrict stablecoin yields. In their view, this is already the "most acceptable, least ideal expression that can be achieved without slowing down the legislative process."
2. Clarity on Commodity Identity
The 2026 Lummis-Gillibrand Responsible Financial Innovation Act (the first chapter of the DAMCA) will amend the 1933 Securities Act to clarify when crypto network tokens transition from "securities" to "commodities."
According to this chapter, the SEC will issue formal guidance within 360 days of the bill's enactment, specifying when individuals involved in the initial offering, sale, or distribution of tokens, as well as the largest recipients of those tokens, are considered "joint and several" issuers of the tokens.
The first chapter establishes broad regulatory oversight over anyone selling, controlling, or facilitating the initial distribution, raising concerns that even those who do not hold the largest share of tokens could be held liable.
Additionally, it expands the SEC's jurisdiction to include tokens issued by foreign governments, tokens without corporate structures, and tokens where U.S. persons hold a majority stake.
The chapter provides some exemptions: if a network token does not confer any financial rights (such as profit-sharing or implied ownership interests), it may be considered a non-security (i.e., a commodity).
To obtain non-security status, the burden of proof will fall on the network token project; the asset issuer must submit written evidence to the SEC demonstrating that its token is not a security. The SEC will have 60 days to reject that evidence.
If the project fails to prove its non-security status to the SEC, the law will require it to publish disclosure reports every six months, with this obligation alone occupying 12 pages of the DAMCA. Projects with gross revenues exceeding $25 million will also be required to publish financial statements audited by an independent public accountant.
Fortunately, the first chapter of the DAMCA will not be retroactive. This means that individuals who provided, sold, or distributed relevant tokens before the bill's enactment will not have to worry about retroactive legal accountability.
3. DeFi Regulation
Chapter three of the DAMCA explores the "decentralized" aspect of decentralized finance, outlining under what circumstances crypto projects are considered—and not considered—truly "decentralized."
According to this chapter, decentralized protocols should allow users to conduct financial transactions based on "predetermined, non-discretionary automated rules or algorithms," and should not rely on any other party to maintain custody or control over their digital assets, aside from the users themselves.
The label of "non-decentralized financial transaction protocol" will apply to any protocol where:
Individuals or groups have the ability to control or change the application's functionality;
The application does not operate solely based on code;
Individuals or groups can restrict, censor, or prohibit user activities.
Non-decentralized protocols will be required to comply with the 1934 Securities Exchange Act and the Bank Secrecy Act, fulfilling new registration, conduct standards, disclosure, record-keeping, and regulatory requirements.
While this chapter may unify the application of securities law across different technologies and protect public interests, it could also sweep up non-immutable smart contract protocols with minimal operational control (including those based on multi-signature technology or designed in trusted cryptographic environments).
Fortunately, the third chapter does include a fairly significant exemption: allowing a protocol's "safety committee" to implement "predefined, temporary, rule-based cybersecurity emergency measures" in response to incidents such as hacking, without jeopardizing its decentralized status.
Worryingly, the third chapter imposes requirements on "web-hosted" crypto wallets that allow users to interact with blockchain technology, mandating that such intermediaries comply with sanctions and anti-money laundering regulations. Confusingly, this regulatory requirement does not apply to "any software or hardware wallet that facilitates individuals in self-custodying their digital assets."
4. "Micro-Innovation" Regulatory Sandbox
The DAMCA requires the CFTC and SEC to establish a "Micro-Innovation Sandbox" within 360 days of the bill's enactment. This sandbox is designed to "allow up to 10 eligible companies to test innovative activities within the U.S.," but they will still be subject to federal and state securities and commodities laws.
To participate in the sandbox, eligible groups must intend to conduct legitimate innovative activities within the U.S., and the number of employees must not exceed 25 in any given fiscal year, with gross revenues not exceeding $10 million.
All applications to enter the sandbox must be jointly approved by the CFTC and SEC. Participants will receive regulatory exemptions, but the commission retains the discretion to revoke those exemptions at any time.
Sandbox participants must meet the disclosure requirements of both commissions regarding their jurisdiction. Any regulatory exemptions granted through the program will take precedence over any state securities or commodities registration requirements.
The program is limited to 20 projects per year, and the total amount of funds controlled by clients, investors, or counterparties of selected companies must not exceed $20 million.
5. Strict Crackdown on Bitcoin ATM Machines
Perhaps most surprisingly, the Digital Asset Market Clarity Act dedicates significant effort to regulating digital asset ATMs—commonly referred to as Bitcoin ATMs.
According to Section 205 of the DAMCA, digital asset ATMs will be designated as "money transfer businesses," imposing a heavy regulatory burden on operators of such "cash-for-crypto" machines.
Operators must submit a detailed list of ATMs to the Secretary of the Treasury every 90 days, including the operator's legal name, business name, the physical address of each machine, and the types of digital assets supported for transactions.
Before conducting transactions with customers, operators must disclose the terms of the transaction in an easily readable manner, along with a series of government-mandated consumer risk warnings.
Additionally, digital asset ATMs must provide customers with receipts that detail transaction information and implement anti-fraud controls to prevent digital assets from being transferred to wallets known to be associated with fraudulent activities.
The Secretary of the Treasury will have the authority to set daily withdrawal limits for digital asset ATMs at their discretion. Under this regulation, operators of digital asset terminals may not conduct a single transaction with "new customers" exceeding $3,500 within any 24-hour period before the regulation is officially enacted.
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