United States: A decisive step towards clear regulation of the crypto market with the Boozman-Booker bill

While the United States struggles to agree on the regulation of cryptos, the Senate is breaking the deadlock. The Agriculture Committee has just unveiled an ambitious bill aimed at clarifying the role of regulators, CFTC and SEC, and laying the foundations for a coherent legal framework. Supported by Senators Boozman and Booker, the text also addresses key concepts such as DeFi, DAOs and even blockchain. This is a first step towards more readable regulation.

A framework for the CFTC, an attempt at order in regulatory chaos

The publication of the preliminary bill by the Senate Agriculture Committee after numerous discussions with David Sacks constitutes a major step in the legal structuring of the American crypto market.

Concretely, this initiative aims to clarify the respective powers of the CFTC and the SEC, two agencies often in conflict in their interpretation of these assets. Republican Senator John Boozman declared that “The CFTC is the competent agency to oversee the digital goods cash market, and it is essential to establish clear rules for this emerging market while protecting consumers”.

His Democratic counterpart Cory Booker emphasizes that this project “will give the CFTC new powers to regulate the crypto spot market, provide new protections for retail investors, and ensure the agency has the resources needed to oversee this growing market”.

Here are the essential elements that this project intends to frame:

• There “blockchain” is defined structurally to establish its legal contours;

• Decentralized finance (DeFi) is mentioned as a field in its own right requiring appropriate regulation;

• Decentralized Autonomous Organizations (DAOs) are identified as legally distinct entities;

• The term “digital commodity” is clarified to distinguish assets supervised by the CFTC from securities under the SEC.

Several sections of the text are still bracketed, indicating outstanding points of disagreement and remaining room for negotiation. As it stands, this bill marks a structuring turning point in the way in which Congress intends to approach the crypto ecosystem, by laying down legal foundations capable of meeting the needs for regulatory clarity often expressed by players in the sector.

A text still contested

Despite this apparent consensus around the reinforced role of the CFTC, certain provisions of the text are already the subject of internal criticism. An excerpt of the proposal, still in brackets, mentions “the minority view”, a position held by some Democratic senators, according to which the Agriculture Committee should not have jurisdiction over certain dimensions of the project, in particular those related to blockchain developers or blockchain service providers.

These elected officials are pleading for expanded collaboration with the Senate Banking Committee, which supervises the SEC, and therefore, the application of securities laws. This divergence reflects a struggle for influence between Senate committees over control of the crypto framework, at a time when the regulation of digital finance is becoming a major political issue.

This bill also resonates with other recent initiatives. The CLARITY Act, adopted by the House of Representatives in July, already gave a central role to the CFTC. The version presented by the Banking Committee in July could merge with this new version.

However, the exact terms of this merger remain unclear, and the legislative timetable uncertain. Certain structuring elements, such as DeFi, NFTs or even stablecoins, remain without definitions or absent from the text, which limits its immediate scope and could fuel future regulatory tensions.

If several players in the sector welcome this project, such as Ji Hun Kim (Crypto Council for Innovation) who sees it as significant progress towards an adapted framework for cryptos, or Mason Lynaugh (Stand With Crypto, Coinbase), for whom it is an important step towards a common-sense regulatory framework, others highlight the risks of inconsistencies if institutions fail to harmonize their approaches.

Ultimately, this proposal marks legislative progress, but above all the opening of a complex political project, where institutional balances and divergent interests will have to be adjusted to give rise to regulation consistent with the end of the shutdown, protective and lasting for the crypto market in the United States.