Source: Bankless
Original title: 5 Highlights from the US Senate's Much-Hyped Crypto Market Structure Draft Bill
Author: Jack Inabinet
Compiled and edited by: BitpushNews
The crypto market may finally be getting what it's been dreaming of—a written market structure law.
This is thanks to the Digital Asset Market Clarity Act (DAMCA) released last night. The bill garnered bipartisan support due to some noteworthy compromises made regarding the future of cryptocurrencies in the United States.
This 278-page document is the result of months of hard-fought negotiations between Senate Republicans, Democrats, and industry lobbyists.
It established a regulatory framework that splits 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 its provisions. Paradigm's policy chief, Justin Slaughter, called the bill "a major victory for Democrats on the Senate Banking Committee," adding that it was something that 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. Stablecoins are strictly prohibited from paying dividends.
Under the Digital Asset Market Transparency Act, stablecoin issuers will be prohibited from distributing returns to passive holders.
Chapter 4 of the DAMCA sets forth guidelines for regulated banking institutions' interactions with digital assets. This chapter prohibits 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 behaviors (such as account opening incentives or cashback on spending), the reality is that protecting stablecoin yields has historically been a strong red line for the crypto industry. Strict restrictions on stablecoins could leave native crypto issuers at a long-term disadvantage when facing the banking sector.
It's noteworthy that several key players in the crypto industry, including Coinbase, surprisingly still support the bill's provisions restricting stablecoin yields. In their view, this is "the least desirable wording acceptable without slowing down the legislative process."
2. Clarity of product identity
The Lummis-Gillibrand Responsible Financial Innovation Act of 2026 (Chapter 1 of the DAMCA) will amend the Securities Act of 1933 to clarify when crypto network tokens transition from “securities” to “commodities.”
According to this section, the SEC will issue formal guidance within 360 days of the enactment of the bill, specifying when individuals who initially offer, sell, or distribute tokens, as well as the largest recipients of the tokens, are considered “joint and several” issuers of the tokens.
Chapter One establishes broad oversight of anyone who sells, controls, or facilitates the initial distribution of tokens, and worryingly, those involved will be held accountable even if they do not receive the largest share of the tokens.
In addition, it extends the SEC’s jurisdiction to tokens issued by foreign governments, tokens without a corporate structure, and tokens in which U.S. citizens hold a majority stake.
This section provides some exemptions: if a network token does not have any attached financial rights (such as profit sharing or implied ownership rights), it can be considered a non-securities (i.e., a commodity).
To obtain non-security status, the responsibility falls on the token project itself; the issuer must submit written proof to the SEC that its token is not a security. The SEC will have 60 days to reject this proof.
If a project fails to demonstrate or is unable to prove its non-securities status to the SEC, the law mandates a semi-annual disclosure report; this obligation alone occupies 12 pages in the DAMCA. Projects with gross revenue exceeding $25 million must also publish audited financial statements by an independent public accountant.
Fortunately, Chapter 1 of the DAMCA will not be retroactive. This means that individuals who offered, sold, or distributed the relevant tokens before the legislation was enacted do not need to worry about being held retroactively liable.
3. DeFi Regulation
Chapter 3 of DAMCA explores the “decentralized” aspect of decentralized finance, outlining under what circumstances crypto projects are considered—and not considered—truly “decentralized.”
According to this section, decentralized protocols should allow users to conduct financial transactions based on "pre-defined, non-discretionary automated rules or algorithms" and not rely on any other person besides the user to maintain custody or control of their digital assets.
The label "non-decentralized finance transaction protocol" will apply to any of the following protocols:
Individuals or groups have the ability to control or change the functionality of an application;
Applications do not run solely based on code;
Individuals or groups can restrict, censor, or prohibit user activities.
Non-decentralized protocols are required to comply with the Securities Exchange Act of 1934 and the Bank Secrecy Act, and to fulfill new registration, code of conduct, disclosure, record keeping and regulatory requirements.
While this chapter may unify the application of securities law across different technologies and protect the public interest, it may also encompass non-immutable smart contract protocols with minimal operational control (including those based on multisignature technology or trusted cryptographic environments).
Fortunately, Chapter 3 does include a fairly large exemption clause: allowing the protocol's "security committee" to take "predefined, temporary, rule-based cybersecurity emergency measures" in response to emergencies such as hacking attacks, without jeopardizing its decentralized status.
Worryingly, Chapter 3 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 regulation does not apply to "any software or hardware wallet that facilitates self-custody of digital assets by individuals."
4. "Micro-innovation" regulatory sandbox
DAMCA requires the CFTC and SEC to establish a "Micro-Innovation Sandbox" within 360 days of the bill's enactment. This sandbox aims to "allow 10 eligible companies to test innovative activities within the United States," but will still be subject to federal and state securities and commodity laws.
To participate in the sandbox, eligible groups must intend to conduct legitimate innovative activities within the United States, and in any given fiscal year, their number of employees must not exceed 25 and their gross revenue must not exceed $10 million.
All applications to enter the sandbox must be jointly approved by the CFTC and the SEC. Program participants will receive regulatory exemptions, but the commission has the discretion to revoke these exemptions at any time.
Sandbox participants must meet disclosure requirements from both commissions when their jurisdiction is involved. Any regulatory exemptions granted through the program will take precedence over any state's securities or commodity registration requirements.
The program selects only 20 projects each year, and the total amount of funds controlled by the selected companies' clients, investors, or counterparties must not exceed US$20 million.
5. Crack down on Bitcoin ATMs
Perhaps most surprisingly, the Digital Asset Market Transparency Act has devoted a great deal of effort to regulating digital asset self-service machines—what we commonly call Bitcoin ATMs.
Under Section 205 of the DAMCA, digital asset self-service machines will be designated as “money transfer businesses,” which will impose a heavy regulatory burden on operators of such “cash for cryptocurrency” machines.
Operators must submit a detailed list of self-service machines to the Minister of Finance every 90 days, including the operator's legal name, business name, physical address of each machine, and the types of digital assets that can be traded.
Before transacting with customers, operators must disclose the terms of the transaction in an easy-to-read manner, as well as a series of consumer risk warnings mandated by the government.
In addition, digital asset self-service machines must provide customers with receipts that record detailed transaction information and implement anti-fraud controls to prevent digital assets from being transferred to wallets known to be associated with fraudulent activities.
The U.S. Treasury Secretary will have the authority to set a daily limit on deposits and withdrawals at digital asset self-service terminals (i.e., encrypted ATMs). Until this regulation is formally implemented, digital asset terminal operators will be limited to a single transaction with a "new customer" of no more than $3,500 within any 24-hour period.
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