U.S. House Proposes Crypto Regulation Draft for Comprehensive Regulatory Framework

The U.S. House Financial Services Committee, in collaboration with the House Agriculture Committee, has unveiled a discussion draft for a new cryptocurrency regulation bill, aiming to bring clarity to an industry long plagued by murky rules. Led by Reps. French Hill (AR-02), G.T. Thompson (PA-15), Bryan Steil (WI-01), and Dusty Johnson (SD-AL), the proposal promises stronger investor protections, a clearer split between SEC and CFTC oversight, and a boost for decentralized projects.

Announced on May 5, the draft builds on last year’s Financial Innovation and Technology for the 21st Century Act (FIT21), which passed the House but stalled in the Senate. Now, lawmakers are taking another shot, hoping to create a framework that keeps the U.S. at the forefront of blockchain innovation.

One-pager of The Draft

What the Draft Does?

The proposed legislation tackles some key issues in crypto regulation:

Splitting Oversight: Tokens classified as “investment contract assets” won’t be treated as securities if they’re transferable and not controlled by a central entity, shifting many to CFTC oversight. This could free projects from SEC’s stringent securities laws.

Investor Transparency: Crypto projects must share details like tokenomics and roadmaps, ensuring users aren’t left in the dark. Registration with the CXTFC is also required for certain activities.

Promoting Decentralization: To prevent market concentration, the bill lowers the ownership cap for project insiders from 5% to 1%. It limits sales by project insiders within 12 months of a token’s first sale. In any three-month period, they cannot sell more than 5% of their total holdings or 1% of the token’s average weekly trading volume, whichever is greater.

Easing Startups: The SEC oversees projects until they’re sufficiently decentralized, then hands them to the CFTC, giving early-stage ventures breathing room.

Why It Matters and What’s Ahead

The U.S. crypto industry has long grappled with fragmented regulation, with the SEC and CFTC often clashing over jurisdiction. Republican lawmakers have long criticized the Biden administration and former SEC Chair Gary Gensler for relying on aggressive enforcement actions rather than providing clear rules for market participants. High-profile SEC lawsuits against Ripple and Coinbase have highlighted the urgent need for a more predictable regulatory framework, which the new discussion draft aims to deliver.

Chairman Thompson emphasized the draft’s potential to transform the industry. “Regulatory clarity is long overdue in digital asset markets,” Thompson said. “This draft marks the first step toward a comprehensive framework that protects consumers, fosters innovation, and closes gaps in oversight. It will give developers and users the certainty they’ve been asking for.”

The draft’s provisions will take stage at a hearing titled “American Innovation and the Future of Digital Assets: A Blueprint for the 21st Century,” scheduled for Tuesday, May 6. Lawmakers, industry leaders, and stakeholders will discuss how the proposal can address fragmented regulation and set the stage for Web3 growth in the U.S.

However, the hearing may not proceed smoothly. Punchbowl News and Politico reported that Rep. Maxine Waters (D-CA), the top Democrat on the House Financial Services Committee, and other Democrats plan to walk out of the joint hearing, citing growing concerns over President Donald Trump’s ventures into digital assets. Waters reportedly intends to hold a “shadow hearing” to investigate Trump’s crypto ties, including his meme coin and World Liberty Financial, escalating tensions around the draft’s rollout.