A complete substitute amendment, v5 fundamentally restructures the regulatory framework for digital assets compared to v4. It replaces v4's dual short titles and detailed CFTC registration provisions with a single short title, a new SEC-centric "ancillary asset" disclosure regime, and a comprehensive set of new titles addressing illicit finance, decentralized finance, banking innovation, and customer protection. Notably, v5 entirely removes the explicit prohibitions on central bank digital currencies present in v4.
Digital Asset Market Clarity Act
- Sponsor
- Rep. Hill, J. French [R-AR-2]
- Committees
- Banking, Housing, and Urban Affairs Committee (primary)
- Last action
- Sep 15, 2026
Bottom line
This bill aims to bring regulatory clarity and consumer protection to the rapidly evolving digital asset market by delineating agency responsibilities and establishing new rules for issuance, trading, and financial services involving digital assets.
What it actually does
The Digital Asset Market Clarity Act establishes a comprehensive regulatory framework for digital assets in the United States, primarily by clarifying the jurisdiction of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) over different types of digital assets. It defines "ancillary assets" and "network tokens" to distinguish securities from non-securities, sets disclosure requirements for ancillary asset originators, and introduces a "Regulation Crypto" for certain exemptions. The bill also addresses illicit finance risks through Bank Secrecy Act amendments, establishes a framework for decentralized finance (DeFi) activities, outlines permissible digital asset activities for banks, and creates a joint CFTC-SEC Micro-Innovation Sandbox.
Proponents argue
Supporters argue that the bill provides much-needed regulatory certainty for the digital asset industry, fostering innovation and competitiveness in the U.S. while ensuring robust consumer and investor protections. They contend that clarifying the distinction between securities and commodities for digital assets will reduce regulatory ambiguity, prevent illicit activities, and allow traditional financial institutions to participate responsibly in the digital asset space.
Opponents contend
Critics might argue that the bill's definitions and exemptions could create new loopholes or unintended consequences, potentially undermining existing securities laws or creating an uneven playing field. Concerns could also be raised about the complexity of the new framework, the potential for regulatory arbitrage, or whether the proposed protections are sufficient against novel risks in the digital asset market. Some might also argue that the bill's approach to DeFi could stifle innovation or impose undue burdens on decentralized protocols.
The bill is extensive and highly technical, requiring significant time to understand its full implications. The estimated 3-4 hours of reading time is substantial, suggesting that a thorough review by stakeholders and policymakers would require considerable effort.
Sec. 102, Title I
Defining Ancillary Assets and Disclosure Requirements
This section defines "ancillary asset" as a network token whose value depends on the efforts of an "ancillary asset originator." It establishes that the offer or sale of an ancillary asset by its originator is considered an investment contract, but a "gratuitous distribution" (like staking rewards) is presumed not to be a security. It also sets up a certification process for network tokens to be treated as non-securities and outlines initial and periodic disclosure requirements for ancillary asset originators, or digital asset intermediaries acting on their behalf.
Supporters argue
Supporters argue this brings clarity to the ambiguous "Howey test" application to digital assets, providing a clear path for projects to launch and operate without being automatically deemed securities, while still ensuring investors receive essential information.
Critics contend
Critics might contend that the definitions are still too complex or could be subject to varied interpretations, leading to continued uncertainty. Some might argue that the disclosure requirements are overly burdensome for smaller projects.
Tradeoffs
Balances the need for regulatory clarity and investor protection with fostering innovation in the digital asset space. The challenge is to define "ancillary asset" and "gratuitous distribution" precisely enough to avoid loopholes or overreach.
Sec. 103, Title I
Regulation Crypto Exemption for Ancillary Assets
This section mandates the SEC to adopt "Regulation Crypto," an exemption from registration requirements for offers, sales, or distributions of investment contracts involving ancillary assets, provided they meet certain monetary and temporal limits (e.g., $50M/year for 4 years, up to $200M total). It also sets conditions for this exemption, including initial and periodic disclosures, and disqualification criteria for certain types of issuers.
Sec. 104, Title I
Restrictions on Sales by Insiders and Control Persons
This section directs the SEC to adopt rules limiting how "related persons" (insiders, large holders) and "distributed ledger control persons" can sell "covered tokens" (ancillary assets acquired from the originator). Restrictions vary based on whether the distributed ledger system is certified as "not subject to coordinated control." It also includes exemptions for material hardship, liquidity provision, and exchange-traded products.
Sec. 105, Title I
Clarifying Network Token Characteristics
This section directs the SEC to adopt rules clarifying that a "network token" is not disqualified from being a non-security (i.e., not providing a "disqualifying financial right") if its value is primarily derived from the distributed ledger system's use, even if it provides governance capabilities or appreciates due to originator efforts. It also grandfathers certain network tokens that were principal assets of exchange-traded products before January 1, 2026, as non-securities.
Sec. 201, Title II
Applying BSA to Digital Commodity Intermediaries
This section amends the Bank Secrecy Act (BSA) to include "digital commodity broker, digital commodity dealer, and digital commodity exchange" in the definition of "financial institution." It mandates the Treasury Secretary (via FinCEN) to issue tailored BSA requirements for these entities, including anti-money laundering (AML) and countering the financing of terrorism (CFT) programs, record retention, suspicious activity reporting, and customer identification. It also explicitly requires compliance with U.S. sanctions laws.
Sec. 203, Title II
Public-Private Information Sharing Pilot Program
This section establishes a pilot program for covered agencies (Justice, Treasury, Homeland Security) and designated private sector entities (banks, money services businesses, digital commodity intermediaries) to securely share information on potential illicit finance violations and emerging risks related to digital assets. It provides liability protection for good-faith information sharing.
Sec. 205, Title II
Regulation and Fraud Prevention for Digital Asset Kiosks
This section mandates registration of digital asset kiosk locations with FinCEN and imposes strict fraud prevention measures. Kiosk operators must provide clear disclosures (terms, fees, fraud warnings), obtain customer acknowledgments, issue detailed receipts, implement anti-fraud policies, and appoint compliance officers. It also requires the use of distributed ledger analytics to prevent transactions with known fraudulent wallets, implements "wallet pinning" (one customer per wallet address), and sets transaction limits for new customers.
Sec. 301, Title III
Regulating Non-Decentralized Finance Trading Protocols
This section defines "non-decentralized finance trading protocol" (DeFi protocols with centralized control elements) and mandates the SEC, in consultation with Treasury, to adopt tailored rules clarifying how existing securities intermediary requirements (registration, conduct, disclosure, etc.) apply to persons controlling these protocols. It also ensures that BSA/AML/CFT requirements apply to such persons if they are deemed financial institutions. The rules must protect software developers' rights and apply based on securities-related activities.
Sec. 302, Title III
Illicit Finance Guidance for DLT Messaging Systems
This section defines "distributed ledger messaging system" (web-hosted software for submitting instructions to DeFi protocols) and directs the Treasury Secretary to issue guidance on economic sanctions and AML/CFT obligations for U.S.-owned/operated systems. This guidance may include using distributed ledger analytics, blocking prohibited transactions, and implementing risk-based measures against illicit finance.
Sec. 308, Title III
Risk Management Standards for Digital Asset Intermediaries
This section requires digital asset intermediaries to implement risk management standards before trading through a decentralized finance trading protocol. These standards include conducting risk analysis (AML, sanctions, fraud, cyber), disclosing risks to customers, detecting market manipulation and illicit activity, and implementing procedures to execute, reject, or suspend transactions based on risk.
Sec. 401, Title IV
Authorizing Digital Asset Activities for Banks
This section explicitly authorizes financial holding companies, financial subsidiaries, national banks, and federal credit unions to engage in various digital asset activities, including custody, staking, lending, payments, operating nodes, providing self-custodial wallets, making loans collateralized by digital assets, and brokerage/dealing services in customer-driven transactions. It clarifies that these activities are "financial in nature" or part of the "business of banking."
Sec. 404, Title IV
Prohibition on Interest/Yield for Payment Stablecoins
This section prohibits "covered parties" (digital asset service providers, excluding permitted stablecoin issuers) from paying interest or yield on payment stablecoin balances to U.S. persons if it's "economically or functionally equivalent to the payment of interest or yield on an interest-bearing bank deposit." It allows activity-based rewards and incentives not equivalent to bank interest. It also prohibits misleading representations about stablecoins being deposits or government-guaranteed.
Sec. 501, Title V
Joint Regulatory Sandbox for Innovation
This section establishes a joint CFTC-SEC Micro-Innovation Sandbox, allowing eligible small firms (up to 25 employees, $10M revenue) to test innovative financial products or services that lack comparable analogues or regulatory regimes. Firms can apply for exemptions from specific securities or commodities laws (excluding anti-fraud laws) for up to 2 years, with a possible 1-year extension.
Sec. 503, Title V
Study on Distributed Ledger-Based Compliance Tools
This section mandates the Comptroller General to conduct a study, in consultation with various financial regulators, on "automated regulatory compliance" using distributed ledger technology. The study will evaluate existing tools for reporting, audit trails, AML/sanctions screening, and assess the feasibility, benefits, and risks of allowing regulated entities to use on-chain, code-based mechanisms to satisfy regulatory obligations.
Sec. 601, Title VI
Exclusion of Software Developers from Securities Laws
This section amends the Securities Act of 1933 and the Securities Exchange Act of 1934 to clarify that a person is not subject to these Acts solely for engaging in activities related to distributed ledger systems, such as compiling transactions, operating nodes, or developing/publishing software (including wallets). It also directs the SEC to clarify circumstances under which persons engaging in activities related to decentralized finance trading protocols (like providing user interfaces or maintaining decentralized governance systems) are not subject to the Acts, while preserving anti-fraud/anti-manipulation authorities.
Sec. 602, Title VI
NFT Safe Harbor
This section establishes a safe harbor, stating that the offer, sale, or transfer of a "nonfungible token" (NFT) is generally not considered a security transaction, unless it "in substance, involves all of the elements of an investment contract." It clarifies that resales not raising new capital for a promoter, or NFTs used as collectibles/membership rights, are not securities. Exceptions include mass-minted series, fractionalized NFTs, or interests representing beneficial claims on NFTs.
Sec. 604, Title VI
Non-Controlling Developers Excluded from Money Transmitter Status
This section clarifies that a "non-controlling developer or provider" of a distributed ledger service is not to be treated as a "money transmitting business" or engaged in "money transmitting" under federal law, solely based on activities like creating software, providing hardware/software for self-custody, or offering infrastructure support. It aims to prevent new registration requirements substantially similar to money transmitter rules for these activities.
Sec. 605, Title VI
Right to Self-Custody Digital Assets
This section prohibits federal agencies from restricting a "covered user" (U.S. individual) from self-custodying digital assets using a "self-hosted wallet" or other means for any lawful purpose. It explicitly states this does not limit existing enforcement authority for illicit finance, money laundering, terrorism financing, or sanctions.
Sec. 701, Title VII
Digital Asset Protections in Stockbroker Bankruptcy
This section amends Chapter 741 of Title 11 (Bankruptcy Code, stockbroker liquidation) to include "ancillary assets" and "digital commodities" in the definitions of "customer" and "customer property." This means that in a stockbroker bankruptcy, these digital assets held for customers would be treated as customer property, intended for distribution to customers rather than becoming part of the general estate.
Sec. 702, Title VII
Digital Commodity Transactions in Insolvency Safe Harbor
This section deems certain digital commodity transactions (purchase, sale, loan, margin loan, repurchase) involving commodity brokers, stockbrokers, financial institutions, financial participants, or securities clearing agencies to be "commodity contracts" for purposes of specific Bankruptcy Code sections. This extends insolvency safe harbor protections (e.g., against avoidance powers, automatic stay) to these digital commodity transactions.
Sec. 801, Title VIII
Digital Asset Educational Materials
This section requires the SEC and CFTC to mandate digital asset intermediaries to provide clear and accessible educational materials to the public. These materials must cover how distributed ledger systems function, common digital asset risks, differences between digital asset and traditional financial markets, reporting requirements, and guidance on recognizing/reporting fraud.
Sec. 901, Title IX
CFTC-SEC Joint Advisory Committee
This section establishes a Joint Advisory Committee on Digital Assets, composed of non-governmental members (digital asset market participants, registered persons, academics, retail users, state regulators) and a NIST representative. Its purpose is to provide nonbinding findings and recommendations to the SEC and CFTC on digital asset rules, regulatory harmonization, and implementation of this Act, and to assist in resolving inter-agency disputes.
Sec. 903, Title IX
Financial Crimes Enforcement Network (FinCEN) Appropriations
This section authorizes appropriations of $30,000,000 annually for fiscal years 2026 through 2030 for FinCEN, specifically for developing digital asset policy, acquiring IT resources, funding operations related to illicit finance, and enforcing digital asset laws. It also allows FinCEN to pay an annual incentive premium (up to 20% of basic pay) to attract highly qualified individuals for positions requiring specialized expertise.
Establishes a rebuttable presumption that a network token is an "ancillary asset" (and thus potentially a security) unless the originator or a digital asset intermediary submits a certification with reasonable evidence that it is not.
Sec. 102(b)(5)(A)(i), Title I
Why it matters:This is a standard legislative technique to establish a default regulatory stance, but its placement might obscure its significant impact on how digital assets are initially classified.
Case for: Proponents would argue this presumption is necessary for investor protection, ensuring that digital assets are treated as securities by default unless proven otherwise, preventing unregistered offerings.
Case against: Critics might argue it creates an unnecessary hurdle for innovation, placing a significant burden on issuers to prove a negative, potentially slowing down legitimate projects.
Estimated impact: High, as it dictates the initial regulatory pathway for many digital assets.
Prohibits the SEC or private plaintiffs from initiating or maintaining actions for Section 5 or 12(a)(1) violations (unregistered securities offerings) for ancillary asset transactions occurring *before* the Act's effective date, provided the originator complies with certain disclosure requirements.
Sec. 102(k)(1), Title I
Why it matters:This is a significant carve-out for past conduct, potentially controversial if highlighted, as it offers a degree of amnesty for prior unregistered offerings.
Case for: Proponents would argue this provides much-needed legal certainty for past activities, preventing retroactive enforcement that could destabilize the market and allowing the industry to move forward under the new framework.
Case against: Critics might argue this provision effectively grants amnesty to entities that may have violated existing securities laws, potentially undermining investor protection and accountability for past actions.
Estimated impact: High, as it resolves potential legal liabilities for numerous past digital asset offerings.
Amends Section 18(b) of the Securities Act of 1933 to treat a "network token" as a "covered security," thereby preempting State securities laws that would otherwise apply.
Sec. 108(e)(5), Title I
Why it matters:Preemption of state law is often a contentious issue, and placing it within a technical amendment can make it less conspicuous.
Case for: Proponents argue this creates a uniform national regulatory landscape for network tokens, preventing a patchwork of state regulations that could stifle innovation and create compliance nightmares for businesses operating across state lines.
Case against: Critics might argue this undermines states' rights to protect their citizens from financial fraud and could lead to a "race to the bottom" in regulatory standards if federal oversight is deemed insufficient.
Estimated impact: High, as it centralizes regulatory authority for network tokens at the federal level.
States that the authorities described in Section 401 (permissibility of digital asset activities for banks) shall not apply to nonfungible assets.
Sec. 401(j), Title IV
Why it matters:This is a significant exclusion, limiting the scope of bank involvement in a specific, rapidly growing segment of the digital asset market. Its placement might make it less noticeable than if it were a main point.
Case for: Proponents might argue this is a prudent, cautious approach, as nonfungible assets (NFTs) are a distinct asset class with unique risks that require separate consideration before banks are fully authorized to engage with them.
Case against: Critics might argue this unnecessarily restricts banking innovation and prevents regulated institutions from providing services in a growing market segment, potentially pushing NFT-related financial activities into less regulated spaces.
Estimated impact: Moderate, as it carves out a specific asset class from new banking authorities.