Senate Banking Committee Advances Crypto Market Structure Bill

On May 14, 2026, the Senate Banking Committee advanced the Digital Asset Market Clarity Act. This bill is styled as substitute text and sets forth a broad market structure framework addressing illicit finance, DeFi, limitations on stablecoin yield, tokenization standards, developer protections, and customer-property and bankruptcy protections. The substitute bill takes on much of the amendment issued by the Senate Banking Committee in January 2026, which we previously analyzed, and now moves to be reconciled with the Senate Agriculture Committee's "Digital Commodity Intermediaries Act," as previously summarized, for consideration by the full Senate. The resulting outcome will then have to be reconciled with the House of Representatives' Digital Asset Market Clarity Act of 2025 (CLARITY Act).

Asset Classification

The substitute bill includes "network tokens" and "ancillary assets," as well as a disclosure and written certification regime, which had previously been included in the Senate Banking amendment but are not concepts set forth in the CLARITY Act. The substitute defines a "network token" as a digital commodity intrinsically linked to a distributed ledger system and expected to derive its value from the use of that system, which would not be considered a security under federal securities laws. An "ancillary asset" is defined as a network token whose value relies upon the entrepreneurial or managerial asset of an "ancillary asset originator" or a related person. The substitute provides a rebuttable presumption as well as a written certification process to the Securities and Exchange Commission (SEC) to allow an originator (and in some cases, an intermediary) to certify, supported by reasonable evidence, that a network token is not an ancillary asset.

The substitute bill also sets forth a disclosure framework for "ancillary assets." The framework requires initial and periodic disclosures by an ancillary originator with the SEC to develop disclosure rules based on considerations relating to originator size, amount sold to the public, and whether a system is subject to "coordinated control." The framework also allows for the termination of disclosure obligations through a certification process with the SEC once the relevant "entrepreneurial or managerial efforts" have ceased.

The ancillary asset framework is similar to that set forth in the SEC's March 2026 interpretation clarifying how the federal securities laws apply to certain crypto assets and transactions involving crypto assets, which was joined by the Commodity Futures Trading Commission (CFTC). The interpretation's taxonomy included "digital commodities" and "digital securities," and explained how a nonsecurity crypto asset may nevertheless be sold pursuant to an investment contract depending on representations and promised managerial efforts. The "ancillary asset" construct in the substitute falls along similar managerial efforts that would be managed through disclosure certification.

Additionally, the substitute bill preserves the application of Regulation Best Interest to commodity brokers and dealers and the investment adviser fiduciary duty for digital commodities that had been set forth in the January amendment introduced by the Senate Banking Committee. However, while the substitute bill includes the preservation of Regulation Best Interest and the investment adviser fiduciary duty, it expressly carves out CFTC registrants from the application of Regulation Best Interest.

Illicit Finance and Digital Asset Kiosks

The substitute bill includes a title dedicated to illicit finance and treats certain digital commodity intermediaries as subject to Bank Secrecy Act requirements such as AML, customer identification, monitoring and reporting of suspicious activity, and sanctions compliance. The substitute bill also delineates a specific framework for digital asset kiosks that includes registration and consumer protection requirements regarding disclosures, receipts, designation of a compliance officer, confirmation steps, holding periods/limits, refunds, and a customer service helpline.

DeFi and Risk Management

A separate DeFi title in the substitute addresses rulemaking for regulators to clarify how a person or control group for a trading protocol could register and covers disclosures, recordkeeping, supervision, and compliance with the Bank Secrecy Act and sanctions. Intermediaries that route activity through DeFi protocols will be expected to manage risk with examination and verification by the relevant regulator or self-regulatory organization. The March 2026 SEC interpretation, discussed above, also framed certain activities as "administrative or ministerial" such as mining and staking, and likely will be incorporated in the rulemaking as to what should be treated as regulated intermediary activity as opposed to noncustodial technical conduct.

The substitute bill also addresses cybersecurity by including temporary, rules-based emergency measures for certain protocols and a voluntary NIST-based cybersecurity program.

Stablecoin Yield

One of the main sticking points for crypto market structure legislation has been the ongoing debate between the crypto and banking industries over stablecoin yield due to the banking industry's concern that permitted payment stablecoins will become a replacement for interest on bank accounts. The substitute reflects much-negotiated compromise language that prohibits the payment of interest or yield "solely for holding payment stablecoins" but recognizes certain activity-based rewards or incentives. While the January amendment had preserved rewards for stablecoin holders, the substitute instead couches the provision as a prohibition on interest and yield on payment stablecoins with carveouts to be determined.

Banking Permissions and Tokenization

The substitute also includes concepts allowing banks and credit unions to use digital assets or distributed ledger systems in otherwise authorized activities. Narrower than the January amendment applying tokenization to securities and other real-world assets, the substitute sets forth a framework for tokenization of securities and treats tokenized financial instruments the same as the underlying instrument for regulatory purposes. Further rulemakings from the SEC and CFTC would address the underlying asset class and likely would follow the March 2026 SEC interpretative guidance that a "security is a security regardless of whether it is issued, or otherwise represented, offchain or onchain." The substitute bill also calls for establishing a CFTC-SEC "micro-innovation sandbox" to enable eligible firms to test innovative activities.

Developer and Customer Protections

Developer protections that are consistent with a "regulatory certainty" approach for noncontrolling software developers and providers are included in the substitute. The substitute bill also provides for a "Keep Your Coins" self-custody protection. Customer property protections in bankruptcy and an insolvency safe harbor are also included.

Ethics Considerations

The strong ethics language in earlier versions of the bill were removed in order to secure bipartisan support and move the bill out of committee. However, in the full Senate, one can expect that the ethics provisions will be reintroduced and that there will be a vigorous debate with the White House in connection with the scope and coverage of those provisions.

Conclusion

The substitute bill now moves toward reconciliation with the Senate Ag's bill on digital commodity intermediaries. If passed by the Senate, the outcome will then have to be reconciled with the House's CLARITY Act. The main differences between the Senate bills and the CLARITY Act relate to taxonomy, the treatment of DeFi, and stablecoin yield, along with concerns over the inclusion of ethics provisions. The Administration has publicly expressed a desire to have crypto market structure legislation enacted by the Fourth of July, but hurdles remain. That said, crypto market structure legislation is moving steadily from concept to drafting choices that will matter operationally for issuers, platforms, and service providers. Firms should begin mapping token and product lines to the substitute bill's taxonomy and identify where disclosure and certification may be necessary to support secondary market trading; implement the substitute bill's provisions regarding AML and sanctions compliance, as well as for DeFi and digital asset kiosks, where appropriate; and review stablecoin reward programs.

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Elizabeth Davis and Stephen Gannon are partners in the financial services group in the Washington, D.C., office of DWT. For more insights, reach out to Elizabeth, Stephen, or another member of our financial services team or sign up for our alerts.