Reintroduction of a crypto oversight bill by Senators Cynthia Lummis and Kirsten Gillibrand, proposing a less prominent role for the U.S. Securities and Exchange Commission (SEC) in crypto regulation.

Instead, the bill suggests that the Commodity Futures Trading Commission (CFTC) should oversee crypto exchanges, and stablecoin issuers should be regulated depository institutions. The bill also outlines a clear distinction between securities oversight and other forms of oversight, a move that has been long-awaited by the crypto industry. The proposed legislation also includes provisions for customer asset segregation, new risk-management standards for crypto lending, and regulations for decentralized finance (DeFi).

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• The bill proposes that the CFTC should oversee most crypto tokens and crypto trading, with both the CFTC and SEC receiving equal funding and having an equal role in a new self-regulatory organization (SRO) for crypto.
• The legislation suggests the creation of a separate organization to govern industry standards and impose penalties for violations, described as the "consumer protection and market integrity authority."
• The bill also includes provisions for customer asset segregation and new risk-management standards for crypto lending, including a ban on "rehypothecation," where crypto firms use customer assets to extend their own credit.
• The legislation proposes that stablecoins can only be issued by federally or state-regulated banks or credit unions, with existing issuers given priority for new licensing.
• The bill also includes a definition for DeFi and sets strict rules for when a software project becomes a more centralized business effort and needs to be registered as an exchange.

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Georgia Quinn, general counsel of Anchorage Digital (sole digital asset bank with an OCC charter)

While the Lummis-Gillibrand proposal is a major step forward from the Senate, we will also be watching the House for any movement on stablecoin and market structure bills.

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