Democrats Unveil Crypto Rules Battle Plan: CFTC, AML, and Trump Ties in Frame

A group of 12 U.S. Senate Democrats has unveiled a detailed seven-pillar framework for regulating the country’s digital assets market, marking the party’s most comprehensive effort to date. The framework, introduced by senators including Ruben Gallego, Mark Warner, Kirsten Gillibrand, and Cory Booker, aims to address gaps in investor protections, strengthen regulatory clarity, and curb potential corruption tied to President Donald Trump’s crypto ventures. The plan signals a willingness to engage in bipartisan negotiations with Republicans on stalled market structure legislation, although key differences remain, particularly around ethics enforcement and DeFi oversight.

The proposal designates the Commodity Futures Trading Commission (CFTC) with new authority over spot markets for non-security tokens, while establishing a process to determine whether certain digital assets fall under the jurisdiction of the Securities and Exchange Commission (SEC) as securities. Token issuers would be required to meet new disclosure standards, and crypto exchanges and custody providers would face specific regulatory rules. Additionally, the framework emphasizes anti-manipulation measures and enhanced consumer protection standards.

One of the most contentious elements of the framework involves the registration of digital asset platforms serving U.S. users with FinCEN as financial institutions. This would bring exchanges, custodians, and other intermediaries under the Bank Secrecy Act and Anti-Money Laundering (AML) requirements. The plan also raises concerns about DeFi protocols, which are flagged as potential vehicles for illicit finance. While the Democrats propose stricter oversight for DeFi, the Republicans have previously advocated for protections for protocol-level developers. It remains unclear whether the Democrats intend to apply the same registration requirements to DeFi software teams.

The framework also proposes a ban on interest or yield paid by stablecoin issuers, including indirectly or through affiliates. This provision is particularly relevant in light of the recent enactment of the GENIUS Act, which allows certain non-direct reward-style programs to persist. In addition, the Democrats have introduced ethics provisions that prohibit elected officials and their families from profiting from crypto projects while in office and mandate disclosure of their digital asset holdings. The senators have accused President Trump of using digital asset projects to enrich himself and his family, which they argue undermines public trust in the industry.

The Democrats' proposal comes as the House of Representatives has already passed the Clarity Act, a Republican-backed legislative vehicle for market structure reform. The Clarity Act has similarly focused on token classification, regulatory authority, and compliance streamlining, though it diverges from the Democrats’ framework in its approach to ethics and DeFi oversight. While Republicans have pushed for swift legislative action, Democrats argue that a bipartisan outcome cannot be rushed. With both parties presenting detailed legislative blueprints, negotiations in the Senate Banking Committee are expected to intensify, with the potential for a resolution depending on the ability to reconcile differences over timing, enforcement, and DeFi regulation.

The introduction of the Democrats’ framework reflects broader political tensions around the role of digital assets in the U.S. financial system and the need for a coherent regulatory framework. As the U.S. seeks to establish comprehensive crypto market rules after years of legislative gridlock, the coming weeks will be critical in determining whether a bipartisan consensus can be reached.