Democrats Unveil Crypto Blueprint: Ethics Rules Target Trump Ties

Twelve Senate Democrats have formally released a legislative framework aimed at regulating the U.S. digital asset market, marking a significant shift from the party’s previous reluctance to address crypto policy in a public manner. The proposal outlines key priorities to close regulatory gaps, enhance consumer protections, and clarify the roles of the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) in overseeing digital assets. The group includes prominent lawmakers such as Sens. Ruben Gallego (D-Ariz.), Mark Warner (D-Va.), and Kirsten Gillibrand (D-N.Y.), who emphasized the need for a “clear road map” to facilitate bipartisan negotiations.

The framework focuses on several core areas, including granting the CFTC exclusive jurisdiction over non-security tokens—effectively positioning digital assets as commodities—and establishing new rules to prevent market manipulation on trading platforms. It also proposes a formal process for determining whether a token is a security or a commodity, with the aim of reducing legal uncertainty and litigation. In addition, the Democrats’ plan calls for the SEC to integrate digital assets into its regulatory framework, with a particular focus on writing rules tailored to decentralized finance (DeFi) protocols and exchanges.

Another key component of the framework involves bringing digital asset platforms into compliance with financial regulations. The proposal requires platforms to register with the Financial Crimes Enforcement Network (FinCEN) under the Bank Secrecy Act, thereby imposing anti-money laundering (AML) and sanctions compliance requirements. This measure is intended to prevent illicit finance and ensure that both centralized and decentralized platforms operating for U.S. users follow the same standards. The framework also mandates that these platforms provide clear and accessible disclosures to investors, covering areas such as governance, insider holdings, and use of proceeds.

The Democratic proposal includes provisions targeting potential conflicts of interest, particularly those involving elected officials and their families. It seeks to block officials from profiting from or endorsing digital assets while in office and mandates the disclosure of crypto holdings. These ethics-focused measures are seen as a direct response to concerns about President Trump’s growing involvement in the crypto space, including his family’s stake in American Bitcoin Corp. and World Liberty Financial. The Democrats argue that a bipartisan regulatory process is essential for creating rules that ensure long-term stability and legitimacy for the market.

While the Democrats’ framework aligns with some aspects of the Republicans’ draft proposal released in July, it introduces several contentious provisions that may complicate bipartisan negotiations. For instance, the emphasis on ethics and DeFi regulation is likely to face resistance from GOP lawmakers who have been pushing for faster legislative action at the behest of the Trump administration. The Democrats, however, have made it clear that they do not see the process as a race. “Achieving a strong, bipartisan outcome will require time and cannot be rushed,” the senators stated, underscoring the need for careful deliberation.

The path forward for comprehensive crypto legislation remains uncertain. While the stablecoin-focused GENIUS Act passed with broad Democratic support in July, the broader market structure bill faces a more complex route. With both parties now holding their positions, the coming weeks will be crucial in determining whether the two sides can find common ground and move toward a final product that both parties can support.