Democrats Demand Checks on Crypto Regs to Keep Power in Check

Senate pro-crypto Democrats have signaled they may withhold support for a proposed market structure bill unless it includes key provisions such as bipartisan representation on the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), as well as stablecoin safeguards. The Senate Banking Committee, chaired by Republican Tim Scott, is nearing finalization of the draft legislation, with plans to hold a markup session before the end of September. However, Democratic committee member Mark Warner has warned that rushing the timeline could undermine bipartisan negotiations and compromise the bill’s broader legislative prospects.

The bill is part of a broader effort to establish a clearer regulatory framework for digital assets, building on the recently enacted Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act). This law introduced a federal licensing system for stablecoin issuers, defined “permitted payment stablecoins,” and imposed strict reserve requirements, including a 1:1 backing with U.S. Treasuries. The GENIUS Act also prohibited rehypothecation of reserves and mandated transparency in operations. These measures aim to enhance trust in stablecoins by reducing operational and custodial risks, particularly in light of past depegging events and the collapse of algorithmic stablecoins.

The potential withdrawal of Democratic support highlights growing concerns about the composition of regulatory agencies and the need for balanced oversight. Pro-crypto Democrats, such as Kirsten Gillibrand, have emphasized the importance of including diverse viewpoints on the SEC and CFTC to prevent regulatory capture and ensure fair enforcement. Without bipartisan representation, these lawmakers may argue that the agencies could lack the necessary checks and balances to serve the public interest, especially in an evolving and complex market.

Stablecoin provisions remain a critical component of the legislative agenda. The GENIUS Act has already established a regulatory framework, but the market structure bill is expected to build on this by further clarifying responsibilities and oversight mechanisms. For instance, the bill may seek to reinforce the distinction between payment stablecoins and other digital assets, ensuring that only those that meet the federal standards—such as fiat-backed stablecoins—are eligible for legal protections and consumer safeguards. This differentiation is crucial to preventing the misuse of stablecoins in illicit financial activities while promoting innovation in legitimate financial applications.

Industry stakeholders and lawmakers are also closely monitoring the regulatory landscape following recent actions by federal agencies. The Federal Reserve has ended its special oversight program for banks’ crypto and fintech activities, shifting to standard supervision processes. This move signals a more accommodative stance toward digital assets, aligning with President Donald Trump’s goal of positioning the U.S. as a global crypto hub. Meanwhile, the SEC and CFTC have issued joint statements clarifying that registered exchanges are not prohibited from facilitating the trading of certain spot crypto asset products. These developments reflect a growing consensus among regulators to streamline the legal environment while maintaining consumer protection and market integrity.

The outcome of these legislative and regulatory efforts will shape the future of the U.S. digital asset market. If the market structure bill passes with strong Democratic support, it could lead to a more predictable and competitive environment for crypto firms, encouraging broader adoption and investment. Conversely, if key provisions—such as stablecoin safeguards or balanced regulatory representation—are omitted, pro-crypto Democrats may block the bill or push for further revisions. Given the current political dynamics and the Senate Banking Committee’s timeline, the coming weeks will be crucial in determining whether the bill moves forward in a form that satisfies both parties.