What changed between these versions
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.
Overview
The changes between v4 and v5 are extensive, constituting a complete rewrite of the bill's operative text. · v5 represents a fundamental restructuring of the proposed digital asset regulatory framework, introducing new concepts and eliminating others.
v5 is a complete substitute amendment, replacing the entirety of v4's text after the enacting clause with a new legislative proposal. The most significant change is the removal of v4's explicit prohibitions on central bank digital currencies (CBDCs) and the introduction of a new regulatory framework that redefines "ancillary assets" and "network tokens" for SEC oversight, replacing the "investment contract asset" and "digital commodity" distinctions from v4. Additionally, v5 introduces new titles addressing illicit finance, decentralized finance, banking innovation, and customer property protections, while largely overhauling the detailed CFTC registration provisions present in v4.
Major additions
This section introduces a comprehensive set of new and redefined terms crucial to v5's regulatory framework, including "ancillary asset," "ancillary asset originator," "network token," "coordinated control," "distributed ledger," "distributed ledger system," "related person," and "smart contract." These definitions underpin the new jurisdictional and operational distinctions throughout the bill.
These new definitions are foundational to the entire revised bill, establishing the terminology and conceptual framework for how digital assets are classified and regulated under the SEC and CFTC, and how decentralization is assessed. This significantly alters the legal landscape for digital asset projects and market participants.
This entire title is new and establishes a comprehensive framework for SEC oversight of digital assets. It includes a new Section 4B of the Securities Act of 1933, which sets forth disclosure requirements for transactions involving "ancillary assets" (a type of security) and defines "network tokens" as non-securities. It also mandates the adoption of "Regulation Crypto" for exemptions, introduces special disposition restrictions for related persons, and extends insider trading provisions to ancillary asset transactions.
This title creates a new, detailed regulatory pathway for digital assets that are deemed securities, providing clarity on disclosure obligations, exemptions, and market conduct. It aims to reduce regulatory uncertainty for issuers and market participants by establishing specific rules for when a digital asset is treated as a security and how it should be regulated.
This new title focuses on strengthening anti-money laundering (AML) and countering the financing of terrorism (CFT) efforts in the digital asset sector. It mandates risk-based examination standards for financial institutions, establishes a pilot program for information sharing on illicit finance, creates a Financial Technology Working Group, and introduces a detailed regulatory framework for digital asset kiosks, including registration, disclosures, and anti-fraud policies.
This title significantly enhances the tools and mandates for combating illicit activities involving digital assets. The new regulations for digital asset kiosks directly impact operators and consumers, aiming to prevent fraud and illicit transactions. The information-sharing program and working group foster collaboration between government and industry to address evolving threats.
This new title addresses the regulation of decentralized finance (DeFi). It mandates rulemaking to clarify how existing securities and Bank Secrecy Act requirements apply to "non-decentralized finance trading protocols," requires Treasury guidance on illicit finance obligations for distributed ledger messaging systems, and introduces a special measure for fund transmittals involving high-risk jurisdictions. It also establishes a voluntary cybersecurity program for DeFi protocols and mandates several studies on DeFi risks and digital asset mixers/tumblers.
This title attempts to bring regulatory clarity and oversight to the rapidly evolving DeFi sector, distinguishing between truly decentralized protocols and those with centralized control. It aims to mitigate illicit finance risks and promote cybersecurity while fostering innovation, impacting developers, users, and intermediaries in the DeFi space.
This new title explicitly authorizes a range of digital asset activities for traditional financial institutions, including financial holding companies, national banks, and federal credit unions. It also prohibits covered parties (digital asset service providers) from paying interest or yield on payment stablecoin balances to restricted recipients, with exceptions for activity-based rewards. Additionally, it mandates joint rules for portfolio margining determinations and capital requirements for netting agreements.
This title provides legal certainty and expands the scope of permissible digital asset activities for regulated banking institutions, potentially increasing their participation in the digital asset market. The prohibition on stablecoin interest aims to protect traditional banking deposits and reduce systemic risk, impacting business models for some digital asset service providers.
This new title introduces several mechanisms for regulatory innovation. It establishes a joint CFTC-SEC Micro-Innovation Sandbox for firms to test innovative activities, mandates international cooperation on digital asset regulation, and requires a GAO study on automated regulatory compliance. It also addresses the regulatory treatment of tokenized securities, promotes voluntary adoption of post-quantum cryptography standards, and establishes an interagency initiative to combat international digital asset illicit finance.
This title aims to create a more adaptive and forward-looking regulatory environment for digital assets. The innovation sandbox provides a controlled environment for new technologies, potentially accelerating development. The focus on international cooperation and tokenized securities addresses key areas for market development and global competitiveness.
This new title provides explicit protections for software developers and introduces a safe harbor for nonfungible tokens (NFTs). It amends the Securities Act and Exchange Act to clarify that certain non-controlling activities by software developers related to distributed ledger systems do not subject them to securities laws. It also includes the "Blockchain Regulatory Certainty Act" to exempt non-controlling developers from money transmitter status and the "Keep Your Coins Act" to protect individuals' right to self-custody digital assets.
This title aims to foster innovation by providing legal certainty to software developers and NFT creators, reducing the risk of unintended regulatory classification. The self-custody protection safeguards individual rights in the digital asset ecosystem, impacting users and developers alike.
This new title addresses the treatment of customer digital assets in bankruptcy. It amends Section 741 of title 11, United States Code, to include "ancillary assets" and "digital commodities" as customer property in stockbroker liquidation proceedings. It also creates an insolvency safe harbor by deeming certain digital commodity transactions as "commodity contracts" for specific bankruptcy code sections.
This title provides crucial clarity and protection for customers holding digital assets with intermediaries in the event of bankruptcy, aiming to ensure that these assets are treated as customer property. This reduces investor risk and provides a more predictable legal framework for insolvency.
This new title focuses on enhancing customer protection through educational initiatives and disclosures. It mandates the SEC and CFTC to require digital asset intermediaries to provide clear and accessible educational materials. It also includes savings clauses clarifying FTC jurisdiction over nonfungible tokens and digital consumer tokens, and requires a joint SEC/CFTC study on financial literacy for digital asset customers.
This title aims to empower consumers with better information and understanding of digital asset markets, reducing the risk of fraud and misinformed decisions. The educational mandates and studies address a critical need for consumer awareness in a complex and evolving market.
This new title covers various miscellaneous provisions. It establishes a Joint Advisory Committee on Digital Assets between the CFTC and SEC, mandates a Memorandum of Understanding between the two agencies for coordinated supervision, and authorizes appropriations for the Financial Crimes Enforcement Network (FinCEN) for digital asset-related activities. Notably, it also includes the "Build Now Act," which adjusts Community Development Block Grant allocations based on housing growth improvement rates.
The joint advisory committee and MOU aim to improve interagency coordination and harmonization in digital asset regulation. Increased funding for FinCEN strengthens illicit finance enforcement. The "Build Now Act" introduces a policy unrelated to digital assets, providing incentives for housing development at the local level.
Deletions
v4 included two short titles for the Act: the "Digital Asset Market Clarity Act of 2025" or "CLARITY Act of 2025" and the "Anti-CBDC Surveillance State Act." It also contained a table of contents for the entire bill.
The deletion of the dual short titles, particularly the "Anti-CBDC Surveillance State Act," signals a fundamental shift in the bill's overall purpose and scope. The removal of the table of contents is a structural change reflecting the complete rewrite.
This title contained detailed definitions for terms like 'blockchain system,' 'digital commodity issuer,' 'end user distribution,' and 'mature blockchain system.' It also outlined joint rulemakings for definitions and mixed digital asset transactions, established an expedited registration process for digital commodity exchanges, brokers, and dealers with provisional status, and included savings provisions for CEA and securities laws.
The deletion of this entire title removes the foundational definitions and initial regulatory pathways proposed in v4. The specific expedited registration process for CFTC-regulated digital commodity intermediaries is eliminated, and the concept of a 'mature blockchain system' as a key regulatory trigger is removed, replaced by new frameworks in v5. This necessitates a complete re-evaluation of the bill's definitional and registration landscape.
This title focused on the treatment of 'investment contract assets,' exempted primary transactions in digital commodities, and set requirements for offers and sales by 'digital commodity related persons' and 'digital commodity affiliated persons.' It also detailed 'mature blockchain system' requirements for digital commodities.
The removal of this title eliminates v4's specific framework for regulating the primary and secondary markets of digital commodities under the SEC. The concepts of 'investment contract assets' and the detailed rules for 'digital commodity related/affiliated persons' are no longer present, replaced by the new 'ancillary asset' and 'related person' framework in v5. This represents a complete overhaul of the SEC's approach to digital asset offerings.
This title outlined the SEC's role in regulating digital commodities and permitted payment stablecoins, including anti-fraud authority, eligibility of alternative trading systems, rulemaking for dual-registered entities, modernization of recordkeeping, exemptive authority, additional CFTC registrations, exemption from State securities laws, exclusion for decentralized finance activities, treatment of custody by banking institutions, broker and dealer disclosures, and digital commodity activities deemed financial in nature. It also included a provision for a Discretionary Surplus Fund.
The deletion of this title removes v4's specific provisions for SEC registration and regulation of digital asset intermediaries. While some concepts like recordkeeping, exemptive authority, and disclosures are re-introduced in v5, they are part of a new, distinct framework. The specific provisions for alternative trading systems, dual-registered entities, and the Discretionary Surplus Fund are eliminated, requiring intermediaries to navigate entirely new regulatory pathways in v5.
This title provided a comprehensive framework for CFTC jurisdiction over digital commodity transactions, including requirements for futures commission merchants to use qualified digital asset custodians, trading certification and approval for digital commodities, and detailed registration and regulation of digital commodity exchanges, brokers, dealers, and associated persons. It also defined 'qualified digital asset custodians,' outlined rules for commodity pool operators and trading advisors, and included an exclusion for decentralized finance activities.
The deletion of this entire title removes v4's detailed and prescriptive framework for CFTC regulation of digital commodity intermediaries. The specific registration categories, core principles for exchanges, and customer asset segregation rules are no longer present in this form. This necessitates a complete re-evaluation of the CFTC's regulatory approach to digital commodity spot markets and intermediaries, as v5 does not directly replace these detailed provisions with a comparable CFTC-specific title, instead integrating some concepts into broader definitions and joint rulemakings.
This title included findings and a sense of Congress on digital asset innovation, codified the SEC's Strategic Hub for Innovation and Financial Technology (FinHub) and the CFTC's LabCFTC, and mandated several studies on decentralized finance, non-fungible tokens, financial literacy, financial market infrastructure, blockchain in payments, illicit use of digital assets, foreign intermediaries, and foreign adversary participation. It also contained conforming amendments to the GENIUS Act.
The deletion of this title removes v4's specific mandates for innovation hubs and a broad range of studies. While some studies are re-introduced in v5 under different titles and with modified scopes, the institutional codification of FinHub and LabCFTC is eliminated. This signifies a shift in how innovation is to be fostered and studied, moving towards new mechanisms like the CFTC-SEC Micro-Innovation Sandbox and AI Innovation Labs in v5.
This title, also a short title for the overall Act in v4, contained explicit prohibitions on Federal Reserve banks from offering financial products or services directly to individuals, directly or indirectly issuing a central bank digital currency (CBDC), and prohibited the Board of Governors from testing, studying, developing, creating, or implementing a CBDC or using it for monetary policy. It included an exception for open, permissionless, and private dollar-denominated currency.
The complete deletion of this title represents a major policy reversal. v4's strong legislative stance against a CBDC is entirely removed in v5, granting the Federal Reserve System significantly more flexibility to pursue CBDC-related activities without explicit legislative prohibition. This is the most significant policy deletion in the comparison.
Modifications
This change reflects the broader restructuring of the bill and the removal of the specific CBDC prohibitions from the main bill identity. The new short title for Title I highlights a specific legislative initiative within the broader digital asset framework.
Before
v4 included two short titles: the "Digital Asset Market Clarity Act of 2025" or "CLARITY Act of 2025" and the "Anti-CBDC Surveillance State Act."
After
v5 includes a single short title for the Act: the "Digital Asset Market Clarity Act." Title I of v5 also has its own short title: the "Lummis-Gillibrand Responsible Financial Innovation Act of 2026."
This structural change means that the precise scope of what constitutes a 'digital commodity' (and thus falls under CFTC jurisdiction) is now integrated into existing commodities law. The interplay with securities is further defined by v5's new 'ancillary asset' and 'network token' framework, requiring a new understanding of jurisdictional boundaries.
Before
v4 defined 'digital commodity' as a digital asset intrinsically linked to a blockchain system, deriving value from its use, and included extensive exclusions for various types of securities, derivatives, stablecoins, banking deposits, pooled investment vehicles, and non-commodity assets.
After
v5 defines 'digital commodity' by referencing the meaning given in section 1a of the Commodity Exchange Act (7 U.S.C. 1a), as added by this Act. This means the detailed definition and its exclusions are now located within the CEA itself, rather than directly in the bill's general definitions section.
This modification broadens the types of distributions that are presumed not to constitute a security offering, providing greater legal clarity and flexibility for projects to distribute network tokens as rewards or incentives for network participation without triggering securities registration requirements. This directly benefits developers and participants in distributed ledger systems.
Before
v4 defined 'end user distribution' as a distribution of a digital commodity not involving nominal value, distributed broadly and equitably as incentive-based rewards (e.g., to users, validators, existing holders). It explicitly included self-staking and self-custodial staking with a third party.
After
v5 defines 'gratuitous distribution' as a distribution of a network token for not more than nominal value, in a broad, equitable, and non-discretionary manner. It expands the mechanisms to include self-staking, self-custodial staking, liquid staking, custodial and ancillary staking services, and programmatic and automated distributions, with specific conditions for each.
This shifts the legal test for determining the level of decentralization of a digital asset system, which is critical for triggering or terminating disclosure obligations and disposition restrictions for related persons. The explicit safe harbors provide greater certainty for decentralized governance structures and necessary security measures, potentially fostering more robust and secure distributed ledger systems.
Before
v4 defined 'mature blockchain system' as a blockchain system not controlled by any person or group under common control, with a certification process and specific criteria for decentralization (e.g., system value, functional system, open/interoperable, programmatic, system governance, impartial, distributed ownership).
After
v5 introduces the concept of 'coordinated control' and mandates the Commission to adopt rules defining when a distributed ledger system is considered to be under coordinated control. It outlines criteria such as the system's openness, permissionless nature, distribution of the network, autonomy, and economic independence, and establishes safe harbors for decentralized governance systems and emergency cybersecurity measures.
This ensures that digital commodity brokers, dealers, and exchanges remain subject to AML/CFT obligations under the Bank Secrecy Act, promoting financial integrity and combating illicit finance in the digital asset sector.
Before
v4 amended 31 U.S.C. 5312(c)(1)(A) to include 'digital commodity broker, digital commodity dealer,' after 'futures commission merchant,' and added 'and any digital commodity exchange registered, or required to register, under the Commodity Exchange Act which permits direct customer access' before the period. It also mandated Treasury rules for AML/CFT programs for these entities.
After
v5 Section 201(a) makes the identical amendment to 31 U.S.C. 5312(c)(1)(A). Section 201(b) mandates Treasury rules for AML/CFT programs for digital commodity brokers, digital commodity dealers, and digital commodity exchanges, consistent with futures commission merchants.
This offers significantly broader legal certainty and reduced regulatory burden for software developers and infrastructure providers in the digital asset space, fostering innovation by clarifying that certain core technical activities do not automatically trigger securities regulation. This directly benefits the development and maintenance of distributed ledger systems.
Before
v4 Section 109 stated that a 'non-controlling blockchain developer or provider of a blockchain service' would not be treated as a money transmitter solely for creating/publishing software, providing hardware/software for self-custody, or providing infrastructure support.
After
v5 Section 601 adds new sections 27C to the Securities Act of 1933 and 15H to the Securities Exchange Act of 1934. These new sections clarify that a person is not subject to these Acts solely for activities like compiling network transactions, providing computational work, or developing/publishing/constituting distributed ledger systems or self-custody software. Section 15H also clarifies circumstances for non-applicability to decentralized finance trading protocols.
This continues to protect individuals' fundamental right to self-custody digital assets, providing a clear legislative safeguard against potential agency actions that might seek to restrict this ability. This is a significant protection for individual autonomy in the digital asset space.
Before
v4 Section 105(c) and GENIUS Act Section 22 explicitly stated a U.S. individual's right to maintain hardware or software wallets for lawful self-custody of digital assets and to engage in direct, peer-to-peer transactions, with carve-outs for financial institutions and sanctions compliance.
After
v5 Section 605, titled the 'Keep Your Coins Act,' states that 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' or other means for any lawful purpose. It includes similar rules of construction regarding illicit finance and sanctions.
This encourages the adoption of distributed ledger technology for regulatory recordkeeping across various financial intermediaries, aiming to enhance efficiency and potentially reduce compliance burdens by leveraging new technologies.
Before
v4 Section 305 mandated the SEC to issue and revise rules to modernize recordkeeping requirements for brokers, dealers, transfer agents, national securities exchanges, investment advisers, and investment companies, to facilitate the utilization of 'blockchain system' records.
After
v5 Section 107 mandates the SEC to adopt rules to modernize recordkeeping requirements for the same entities, specifically to facilitate the utilization of 'distributed ledger' records.
This provides the SEC with more explicit and flexible authority to grant exemptions, including on a case-by-case basis via order, and gives the Commission greater control over the process of considering such applications. This could enable more tailored regulatory relief for specific digital asset activities.
Before
v4 Section 306 amended Section 28 of the Securities Act of 1933 to allow the Commission to grant exemptions 'by rule or regulation.'
After
v5 Section 106 amends Section 28 of the Securities Act of 1933 to allow exemptions 'by rule, regulation, or order' and adds a requirement for the Commission to determine the procedures under which an exemptive order shall be granted, and grants the Commission sole discretion to decline to entertain any application for an order of exemption.
This aims to provide investors with clearer and more comprehensive information about the risks to their digital assets in the event of a broker-dealer's insolvency, with enhanced input from SIPC to ensure robust customer protection measures are considered.
Before
v4 Section 311 mandated the SEC to issue rules requiring written disclosures from registered brokers or dealers to investors regarding the treatment of customer digital commodities, permitted payment stablecoins, or investment contracts involving digital commodities in insolvency, resolution, or liquidation proceedings.
After
v5 Section 804 mandates the SEC, after consultation with the CFTC and the Securities Investor Protection Corporation (SIPC), to issue rules requiring written disclosures from registered brokers or dealers to investors regarding the treatment of customer digital commodities, payment stablecoins, or securities involving digital commodities in insolvency, resolution, or liquidation proceedings.
This aims to create a more comprehensive and customer-protective framework for portfolio margining, particularly by addressing how assets would be handled during insolvency scenarios, thereby reducing uncertainty for market participants and enhancing customer safeguards.
Before
v4 Section 105(e) mandated the SEC and CFTC to jointly issue rules describing the process for persons registered with either Commission to seek a joint order or determination for portfolio margining of various instruments, including digital commodities.
After
v5 Section 402 mandates the SEC and CFTC to jointly issue rules to facilitate portfolio margining of various instruments, including digital commodities. It adds specific requirements for these rules to describe the treatment of any account and assets in insolvency proceedings and mandates consultation with SIPC and other regulators.
This ensures that the development of capital requirements for netting agreements is coordinated with the broader framework for portfolio margining, promoting consistency and comprehensive risk management across related financial activities involving digital assets.
Before
v4 Section 105(f) mandated the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, and the Federal Deposit Insurance Corporation to develop risk-based and leverage capital requirements for insured depository institutions and holding companies that address netting agreements.
After
v5 Section 403 mandates the same agencies to develop risk-based and leverage capital requirements for insured depository institutions and holding companies that address netting agreements, explicitly stating that this should be 'consistent with section 402' (v5's new portfolio margining section).
This continues the focus on investor education for digital assets, but expands the reach to a broader set of intermediaries and updates the language to reflect the new conceptual framework of v5, aiming for more comprehensive public understanding of the digital asset ecosystem.
Before
v4 Section 314 mandated the SEC, in consultation with the CFTC, to require any registered entity facilitating digital commodity or investment contract trading to provide educational materials on blockchain, digital commodity risks, market differences, reporting, and fraud.
After
v5 Section 801 mandates the SEC and CFTC to jointly require digital asset intermediaries to provide clear and accessible educational materials on distributed ledger systems, digital asset risks, market differences, reporting/disclosure, and fraud.
This maintains the focus on understanding and combating the illicit use of digital assets but emphasizes the input and perspective of law enforcement agencies, potentially leading to a more enforcement-focused assessment of the problem.
Before
v4 Section 509 required the Secretary of the Treasury, in consultation with the SEC and CFTC, to conduct a comprehensive review of how Foreign Terrorist Organizations and Transnational Criminal Syndicates utilize digital assets in connection with illicit activities.
After
v5 Section 206 requires the Secretary of the Treasury, in consultation with the Attorney General, to conduct a comprehensive review of how foreign terrorist organizations and transnational organized criminals utilize digital assets in connection with illicit activities.
This expands the scope of the GAO's assessment of risks posed by foreign digital asset entities, ensuring a broader range of market participants are considered in the analysis of illicit finance vulnerabilities and regulatory gaps.
Before
v4 Section 510 required the Comptroller General (GAO), in consultation with the Treasury Secretary, to study the risks posed by 'centralized intermediaries' primarily located in foreign jurisdictions that provide services to U.S. persons without BSA-similar regulatory requirements.
After
v5 Section 310 requires the GAO, in consultation with the Treasury Secretary, to study the risks posed by 'digital asset intermediaries' primarily located in foreign jurisdictions that lack BSA-similar regulatory requirements and provide services to U.S. persons.
This expands the scope of national security risk assessments related to foreign adversary involvement in digital asset markets, ensuring that a wider array of entities in the digital asset ecosystem are considered for potential threats.
Before
v4 Section 511 required both Treasury (in consultation with CFTC/SEC) and GAO studies on 'digital commodity registrants' owned by foreign adversaries, data collection about U.S. persons, and misuse or theft of proprietary intellectual property.
After
v5 Section 311 requires both Treasury (in consultation with CFTC/SEC) and GAO studies on 'digital asset intermediaries' that are owned by governments of foreign adversaries, data collection about U.S. persons, and misuse or theft of proprietary intellectual property.
This directs a more focused and comprehensive analysis of potential systemic risks posed by decentralized finance and digital asset lending, indicating a heightened concern among regulators for the stability of the broader financial system. The inclusion of the Federal Reserve emphasizes a macroprudential perspective.
Before
v4 Section 504 required a joint SEC, CFTC, and Treasury study on decentralized finance, covering its nature, size, role, interoperability, governance, benefits, risks, illicit activity, and cross-border aspects.
After
v5 Section 313 requires joint studies by the Treasury Secretary, the Board of Governors of the Federal Reserve System, the SEC, and the CFTC. These studies specifically examine the financial stability risks of decentralized finance protocols (including functions, leverage, pricing, and linkages to traditional finance) and the risks to financial stability from credit extension on digital assets.
This continues the directive for a comprehensive GAO study on NFTs, ensuring that policymakers receive ongoing analysis of this evolving segment of the digital asset market, its benefits, risks, and integration with traditional sectors.
Before
v4 Section 505 required the Comptroller General (GAO) to carry out a study of non-fungible tokens (NFTs), analyzing their nature, size, role, similarities/differences with other digital commodities, minting, storage, interoperability, scalability, benefits, risks (including IP and cybersecurity), integration with traditional markets, and illicit activity.
After
v5 Section 603 requires the Comptroller General (GAO) to carry out a study of nonfungible tokens (NFTs), covering largely the same analytical points as v4.
This maintains the focus on improving financial literacy but expands its applicability to all types of digital assets, rather than just commodities, ensuring that educational efforts are comprehensive across the digital asset ecosystem.
Before
v4 Section 506 required the SEC and CFTC to jointly conduct a study to identify methods for expanding financial literacy among retail 'digital commodity holders,' focusing on improving materials, coordination, efficacy in specific communities, and developing a strategy.
After
v5 Section 803 requires the SEC and CFTC to jointly conduct a study to identify methods for expanding financial literacy among retail 'digital asset customers,' covering similar aspects as v4.
Scope
Complete substitute — The changes are scattered throughout the bill, with a complete overhaul of all titles and the introduction of many new sections and concepts. — v5 represents a meaningful change in policy direction relative to v4, particularly with the removal of explicit CBDC prohibitions and the introduction of a more detailed, nuanced regulatory framework for digital assets under the SEC and CFTC. — The changes in v5 fundamentally redefine core terms and establish new regulatory frameworks that interact extensively with existing securities and commodities laws, requiring new rulemakings and interpretations across both the SEC and CFTC. The new definitions of 'ancillary asset' and 'network token' directly impact the application of securities laws to digital assets, while the removal of CBDC prohibitions alters the Federal Reserve's policy space.
Impact analysis
Federal Reserve System
Experiences a gain in flexibility, as legislative restrictions on exploring, developing, or issuing a CBDC are removed, allowing the Federal Reserve to pursue such initiatives without this specific legislative constraint.
v4 contained explicit prohibitions on the Federal Reserve from directly or indirectly issuing a central bank digital currency (CBDC) and from using a CBDC for monetary policy. v5 entirely removes these prohibitions.
Digital Asset Issuers and Originators
Experiences a procedural change and potential gain in clarity, as the regulatory framework for classifying and regulating digital asset offerings is fundamentally redefined. This new framework aims to provide more precise guidance on when an asset is a security versus a non-security, potentially reducing regulatory uncertainty but requiring adaptation to new definitions and compliance processes.
v4 subjected 'digital commodity issuers' to SEC disclosure for 'investment contracts involving digital commodities' and CFTC rules for 'digital commodities.' v5 introduces a new SEC disclosure regime for 'ancillary assets' (a type of security) and defines 'network tokens' as non-securities. It also replaces the 'mature blockchain system' concept with 'coordinated control' for decentralization assessment.
Digital Asset Intermediaries (Exchanges, Brokers, Dealers)
Experiences a fundamental restructuring of their regulatory pathways. While still subject to dual regulation, the specific requirements and avenues for compliance are new, potentially offering more flexibility through innovation sandboxes but demanding adaptation to entirely new rulemakings and a different definitional landscape.
v4 included detailed CFTC registration and regulation for 'digital commodity exchanges, brokers, and dealers,' and SEC registration for intermediaries dealing with 'investment contracts involving digital commodities.' v5 removes these specific CFTC titles and instead introduces a general term 'digital asset intermediary,' mandating new SEC/CFTC rulemakings for applying existing securities and BSA requirements to 'non-decentralized finance trading protocols,' and establishing a CFTC-SEC Micro-Innovation Sandbox.
Software Developers and Distributed Ledger Infrastructure Providers
Experiences a significant gain in legal certainty and reduced regulatory burden. The broader and more explicit exemptions from both money transmitter and securities law classifications for core technical activities are intended to foster innovation in the underlying technology by mitigating regulatory risk.
v4 provided a limited exemption from money transmitter status for 'non-controlling blockchain developers.' v5 expands these protections significantly, adding explicit exemptions from securities law applicability for specific non-controlling activities related to distributed ledger systems and including the 'Blockchain Regulatory Certainty Act' for money transmitter exemptions.
Retail Digital Asset Users
Experiences a gain in consumer protection, particularly when interacting with digital asset kiosks, through enhanced transparency, fraud prevention, and recourse mechanisms. The continued protection of self-custody rights also safeguards individual control over digital assets.
v4 included protections for self-custody and general educational material requirements. v5 maintains self-custody protection through the 'Keep Your Coins Act' and mandates educational materials, but also introduces a comprehensive regulatory framework for digital asset kiosks, including detailed disclosures, anti-fraud policies, transaction limits, and refund mechanisms.
Traditional Financial Institutions (Banks, Credit Unions, Financial Holding Companies)
Experiences a gain in clarity and expanded permissible activities, providing a clearer legal basis for engaging in digital asset services. The stablecoin interest prohibition could indirectly benefit traditional banking deposits by reducing competition from non-bank digital asset providers offering yield on stablecoins.
v4 had limited provisions for digital commodity activities being 'financial in nature' and general treatment of custody. v5 explicitly authorizes a broad range of digital asset activities for these institutions, including custodial services, lending, payments, and market-making. It also introduces a prohibition on covered parties (digital asset service providers) from paying interest or yield on payment stablecoin balances.
Actors Engaged in Illicit Finance
Experiences a loss of operational space due to increased scrutiny and new tools for combating illicit finance. The enhanced regulatory and enforcement capabilities are designed to make it more difficult for illicit actors to use digital assets for money laundering, sanctions evasion, and other illegal activities.
v4 applied BSA requirements to digital commodity intermediaries and mandated studies on illicit use. v5 significantly strengthens the illicit finance framework by introducing new examination standards, an information-sharing pilot program, new Treasury special measure authority for fund transmittals, reports on offshore stablecoins and mixers/tumblers, and risk management standards for intermediaries.
State Securities Regulators
Experiences a clarification of their jurisdictional boundaries. While federal preemption over state securities laws for certain digital assets is reinforced, their authority to pursue anti-fraud and anti-manipulation actions is explicitly preserved, ensuring continued oversight in these areas.
v4 exempted digital commodities from State securities laws. v5 exempts 'network tokens' and 'ancillary assets offered under Regulation Crypto' from State securities laws, while explicitly preserving State anti-fraud and anti-manipulation authority.
Local Governments (Metropolitan Cities and Urban Counties)
Experiences a procedural change and potential gain in funding. This new incentive structure encourages local governments to adopt policies that promote housing growth by linking it to federal grant allocations, impacting local planning and development strategies.
v4 contained no provisions related to housing or community development. v5 introduces the 'Build Now Act' (Section 904), which adjusts Community Development Block Grant allocations based on a housing growth improvement rate.