Senate Banking Committee Releases Amendment to 2025 Responsible Financial Innovation Act Draft

On January 12, 2026, Senate Banking Committee Chairman Tim Scott released the "Digital Asset Market Clarity Act" as a proposed amendment to the Senate Banking Committee's September 2025 discussion draft of the Responsible Financial Innovation Act of 2025 ("RFIA draft") outlining a proposed digital asset market structure. The Senate Banking Committee previously had issued a shorter 32-page initial discussion draft in July, which built upon the Digital Asset Market Clarity Act of 2025 ("CLARITY Act") passed by the House of Representatives.

The Senate Banking Committee's bipartisan amendment includes much of its prior discussion draft with some notable additions relating to decentralized finance, developer protections, and stablecoin rewards. This amendment is scheduled for a hearing on January 15, 2026, which will address the 137 proposed modifications that were submitted to this amendment. Should those modifications get resolved, the resulting Senate Banking bill will have to be reconciled with the Senate Agriculture Committee, who oversees the CFTC, and that outcome will then have to be reconciled with the House of Representatives (who have indicated they are not amenable to wholesale replacement of the CLARITY Act).

We will provide updates as these changes develop. In the interim, this summary sets forth the key differences between the amendment and the Senate Banking Committee's prior discussion draft.

Title I: Responsible Securities Innovation

The amendment includes a number of modifications to the discussion draft relating to responsible securities innovation. The definition of "ancillary asset" is changed from the discussion draft to mean "a network token, the value of which is dependent upon the entrepreneurial or managerial efforts of an ancillary originator or a related person." A "network token" subsequently is defined as a digital commodity intrinsically linked to a distributed ledger system and derives its value from the use of the distributed ledger system, and would not be treated as securities solely for purposes of the federal securities laws. Both the terms "ancillary asset" and "network tokens" are terms that were not included in the House's CLARITY and will ultimately have to be reconciled.

Similar to the discussion draft, the amendment includes a written certification process for network tokens to demonstrate that it is not an ancillary asset. There is a rebuttable presumption that a network token is an ancillary asset unless the originator of the network submits a completed written certification to the SEC sufficient to demonstrate that the network token is not an ancillary asset. The SEC has 60 days to deny a certification, if based on reasonable evidence, that a material change in circumstances has occurred after submission of the certification and providing 10-day notice of its intent to deny.

The amendment also applies the SEC's Regulation Best Interest to a digital commodity broker or dealer and applies the investment advisers' fiduciary duty to digital commodities. As digital commodity brokers and dealers will be within the CFTC's purview, this will have to be reconciled with the Senate Agriculture Committee.

Although the amendment removes the section calling for rulemaking on what constitutes an investment contract from the discussion draft, the amendment lowers the amount of the exemption from registration requirements for offers and sales of investment contracts involving ancillary assets if the offer or sale does not exceed $50 million in gross proceeds (from $75 million in the discussion draft) or 10% of total dollar value of ancillary assets. The amendment also limits the amount that an ancillary asset originator can raise to $200m in gross proceeds in reliance on the SEC's Regulation Crypto.

Rulemaking on the exemption from disposition restrictions for material hardship, liquidity provision, agency, ETP and passive funds and includes reporting requirements for related person disclosures will also be required under the amendment. While the amendment took out the section calling for the modernization of SEC's mission from the discussion draft, the amendment preserves the modernization of recordkeeping requirements and securities regulations for digital asset activities.

Title II: Protecting Against Illicit Finance

The modifications to this title include requiring Treasury to add BSA requirements consistent with the requirements for futures commission merchants to digital commodity brokers, dealers, and exchanges. These entities will be required to establish AML, CIP, and CFT programs, monitor and report suspicious activity, and comply with OFAC.

This title also includes a section specific to digital asset kiosks. Digital asset kiosk locations will need to be registered with Treasury. This section calls for the prevention of fraudulent transactions at digital asset kiosks by requiring disclosures and the provision of receipts to customers, the appointment of a compliance officer of digital asset kiosk operators, confirmation required from new customers, holding period, transaction limits, and issuance of refunds, as well as a customer service helpline.

Title III: Responsible Innovation in Decentralized Finance

New Title III addresses decentralized finance, which has been a point of significant contention with the digital asset industry. The amendment directs the SEC and Treasury to issue rules clarifying how a person or a group in control of a trading protocol should register the protocol. The rules would address disclosure, recordkeeping, and supervisory requirements, as well as compliance with BSA, AML and sanctions laws. Crypto intermediaries using DeFi protocols will have to implement risk management standards for trading through a DeFi protocol, where the SEC, CFTC, or their respective self-regulatory organization would verify compliance through examinations of the intermediary.

The amendment also addresses cybersecurity concerns for decentralized finance trading protocols. For non-decentralized finance trading protocols, pre-defined, temporary rules-based cybersecurity emergency measures exercised by an incident response or security council exclusively in response to a specific cyber event and publicly disclosed authorization mechanisms shall not constitute common control or an agreement to act in concert. The National Institution of Standards and Technology (NIST), with SEC and CFTC, will establish a voluntary program for adoption by persons developing decentralized finance trading protocols or engaging in covered activities of applicable NIST cybersecurity standards.

The amendment adds a section for illicit finance obligations for distributed ledger application layers, which are web-hosted software applications that provide users with the ability to create or submit an instruction, communication, or message to a distributed ledger application to execute the user's transaction. Guidance will be provided from Treasury clarifying economic sanctions obligations, as well as AML and CFT requirements applicable to a distributed ledger application layer owned or operated by a U.S. person.

The amendment also provides that any state or federal law enforcement agency—including the Treasury Department—may place a temporary hold or restriction on certain digital assets that would delay the execution of a transaction, conversion, or withdrawal involving digital assets for a reasonable period of time not to exceed 30 calendar days, but subject to an agency request for an extension up to an additional 150 days.

Additionally, the amendment sets forth a litany of studies and reports addressing: illicit finance threats in connection with U.S. dependent offshore stablecoins, digital asset mixers and tumblers, intermediaries in foreign jurisdictions, foreign adversary activities, cybersecurity standards, the role of decentralized finance protocols and financial stability risks of decentralized finance trading and credit in digital commodity markets.

Title IV: Responsible Banking Innovation

The amendment expands upon the discussion draft by allowing federal credit unions and insured credit unions (in addition to financial holding companies, national banks, and state banks) to use a digital asset or distributed ledger system to perform, provide, or deliver any activity, function, product, or service that the federal credit union is otherwise authorized to perform.

One of the more controversial provisions to the amendment relates to rewards for stablecoin holders. While the amendment provides that digital asset service providers may not pay any form of interest or yield solely for holding stablecoin balances consistent with the GENIUS Act, the amendment proposes that this prohibition will not apply to an activity-based reward or incentive, including any consideration, reward, or benefit in connection with a transaction, use of a wallet or protocol, participation in a loyalty or incentive program, or with providing liquidity, governance, validation, staking or other ecosystem participation. Permitted payment stablecoin issuers will not be deemed to pay interest or yield with respect to a payment stablecoin solely because a third party independently offers consideration, rewards, or incentives with respect to that payment stablecoin unless the permitted payment stablecoin issuer directs the program with respect to those rewards or incentives. The amendment also includes prohibitions on marketing and promotional efforts representing that the payment stablecoin is a deposit or FDIC-insured, that such compensation is paid by the payment stablecoin itself or its issuer, is risk free or comparable to interest paid on a bank deposit, or that the compensation is paid by a person other than the person actually responsible for paying the applicable yield or interest. The SEC and CFTC would promulgate rules requiring disclosure of compensation paid by digital asset intermediary in connection with the use of a payment stablecoin, with the SEC requiring disclosures of compensation whereby digital asset intermediaries may not market the offering of compensation paid by the intermediary unless it has provided the required disclosures.

Title V: Responsible Regulatory Innovation

Similar to the discussion draft, the amendment's section on tokenization of real world assets calls for rulemaking by SEC and CFTC, but also includes a prohibition for any person to represent that a tokenized real world asset is itself, or equivalent to, the underlying real world asset. It would also be unlawful for any person to represent that any tokenized financial instrument is economically or legally equivalent to the financial instrument unless it can be shown that the tokenized financial instrument confers substantially equivalent rights as the underlying asset, is created in full compliance with the laws governing the underlying asset, records of ownership are maintained, and the distributed ledger satisfies requirements for accuracy, resilience, auditability, and settlement finality. For regulatory purposes, the tokenized financial instrument shall be treated as the financial instrument it represents. Any financial instrument that is a security will not cease to be a security because the financial instrument is issued, recorded, represented, or transferred using distributed ledger technology. The SEC is called upon to issue rules on tokenized financial instruments representing securities and security-based swaps, with the CFTC to issue rules on tokenized financial instruments representing futures, swaps, and other derivatives. The rules would address how the requirements apply to custody, books and records, reconciliation with transfer agents, auditability, settlement finality, and other operational risks.

The amendment adds a section for international coordination to combat digital asset illicit finance and calls for an annual report on foreign digital asset trading volume and compliance with U.S. standards and remediation actions.

Title VI: Protecting Software Developers and Software Innovation

The amendment includes the Blockchain Regulatory Certainty Act, which provides that a noncontrolling developer or provider will not be treated as a money transmitting business or engaged in money transmitting and not subject to any registration requirement solely on the basis of creating or publishing software to facilitate the creation or providing maintenance services to a distributed ledger, providing hardware or software to facilitate a customer's own custody or safekeeping of the digital assets of the customer, or providing infrastructure support to maintain a distributed ledger service. The amendment also renames the discussion draft's self-custody provision as the Keep Your Coins Act, where a federal agency may not prohibit, restrict, or otherwise impair the ability of a covered user to self-custody digital assets using a self-hosted wallet to conduct transactions.

Other Modifications

The amendment adds Title VIII addressing customer protection. Title VIII provides for educational materials, savings clauses, a study on financial literacy, consultation with SIPC on mandatory broker dealer disclosures to investors about the status of payment stablecoins and digital commodities. The amendment also provides appropriations to FinCEN to develop policy relating to digital assets, acquiring information technology resources, and funding operations.

Conclusion

The Senate Banking Committee was scheduled to have its hearing on the bill on Thursday, January 15, 2026, which was subsequently postponed to a later date. Assuming the committee can resolve the numerous proposed modifications filed in response to the amendment, the Senate Banking Committee's bill will then have to be reconciled with the Senate Agriculture Committee's discussion draft (expected to be released on January 21, 2026 with their respective hearing scheduled for January 27, 2026) and conformed with the House's CLARITY Act, it is clear that there is an enormous effort being put into establishing crypto market structure legislation which ultimately will be game changing for the digital asset industry in the United States.

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Elizabeth Davis and Steve Gannon have extensive experience spanning financial compliance, regulatory counsel, and enforcement matters, providing insights to help clients navigate complex challenges in the financial services sector. For more insights, contact Elizabeth, Steve, or another member of Davis Wright Tremaine's financial services team or sign up for our alerts.