The passage of the Digital Asset Market Clarity Act (currently pending in the Senate) would launch one of the most ambitious notice-and-comment rulemaking programs since Dodd-Frank — more than 40 mandates spanning five agencies with deadlines clustering between 270 and 360 days after enactment. Section 905 would require each regulator to adopt rules within one year — a sprint requiring simultaneous proposals across overlapping subjects.
Industry participants that wish to shape these policies should plan now.
SEC Rulemakings
The Securities and Exchange Commission would bear the heaviest burden. Within 360 days, it would be required to complete rulemaking under the new Section 4B — which would govern disclosure requirements for network tokens whose value depends on the central efforts of its originator, known as “ancillary assets” — and adopt “Regulation Crypto,” a framework that would exempt certain transactions involving tokens that meet the definition from full securities registration requirements.
Regulation Crypto would be the Clarity Act’s primary domestic capital formation pathway. Originators would be required to file initial disclosures 30 days before the first sale and semiannual disclosures thereafter.
Coordinated control. Perhaps the most consequential rulemaking would be the SEC’s definition of “coordinated control” — determining when a distributed ledger system, together with a related ancillary asset, remains subject to ongoing disclosure obligations. Until this rulemaking is complete, token projects would face fundamental uncertainty about the scope of the disclosure regime.
Network token disqualifying rights. Defining which rights disqualify a token from non-security status would set the securities law perimeter for existing tokens — making them among the most market-moving administrative actions in the commission’s history. Practitioners should anticipate significant industry comment on whether features such as fee-sharing mechanisms, and burn-and-mint tokenomics cross the disqualification line.
Disposition restrictions. The SEC would have to adopt lockup and volume limitations on dispositions by insiders and exemptions for material hardship, liquidity provision, agency transactions, and exchange-traded products. Founders, venture investors, and early employees holding token positions would need to model these restrictions immediately upon enactment to plan treasury management and compensation strategies.
Coordination Complexity
Several significant provisions would require joint action by the SEC and Commodity Futures Trading Commission or, by the SEC, CFTC, and Treasury Department together.
Portfolio margining. For broker-dealers and futures commission merchants currently maintaining separate margin pools, this rulemaking could reduce capital requirements.
Intermediary disclosure. Where an ancillary asset originator hasn’t furnished required disclosures, an intermediary could make disclosures under joint SEC and CFTC rules — addressing the market reality that many projects operate offshore.
Micro-innovation sandbox. Within 360 days, the SEC and CFTC would be required to jointly establish a regulatory sandbox, offering early-stage projects a path to test innovative products under relaxed requirements.
Stablecoin Yield
Section 404 would require the SEC, CFTC, and the Treasury to jointly promulgate rules within one year clarifying when the prohibition on payments “solely in connection with holding” payment stablecoins would apply, producing a list of permissible rewards and establishing disclosure requirements. The banking industry’s advocacy for tight restrictions on stablecoin yield means this rulemaking would likely attract extraordinary comment volume and potential legal challenge.
Treasury and FinCEN
Treasury’s implementation mandate would be substantial. The Financial Crimes Enforcement Network would issue Bank Secrecy Act requirements for digital commodity brokers, dealers and exchanges consistent with existing Futures Commission Merchant requirements, prescribe threshold amounts for digital asset kiosk transactions, and promulgate tailored rules defining BSA compliance for persons controlling non-decentralized finance trading protocols.
Separately, Treasury would be required to adopt rules implementing money laundering and sanctions evasion risk-analysis standards for digital asset intermediaries, and establish coordinated, risk-based examination standards for financial institutions in the digital asset sector.
Banking Regulators
Banks engaged in digital asset activities should monitor rulemaking on capital requirements for netting agreements involving digital assets, as capital treatment will determine whether institutional-grade services can be profitably offered through the banking system.
DeFi and Developer Protections
The SEC would clarify by rule when decentralized finance participants aren’t subject to the Exchange Act, while directing tailored rules for non-decentralized finance trading protocols. Whether a protocol is categorized as decentralized or non-decentralized would determine the rules that apply. Projects with security councils, multisig arrangements, or upgrade authority would need to evaluate whether these features bring them within the “control” perimeter.
Open Questions
Coordinated control weighting. The bill lists control indicia but doesn’t address weighting. A project with 30% insider concentration but fully open-source code could argue for a safe harbor, although the SEC could adopt a bright-line test.
Intermediary disclosure scope. Intermediaries would be permitted to satisfy disclosure requirements on behalf of originators, but new rules could require independent verification by intermediaries, imposing a significant operational burden.
DeFi protocol “control” threshold. The distinction between decentralized finance trading protocols and non-decentralized finance trading protocols turns on “control,” but the bill doesn’t define the term with necessary specificity.
Sequencing risk. Many rulemakings are interdependent. If the SEC sequences these rulemakings serially rather than in parallel, the effective implementation timeline may extend well beyond the bill’s prescribed deadlines.
A Practitioner’s Checklist
The substance is sufficiently developed — and the anticipated rulemaking timeline sufficiently compressed — that market participants and their counsel should prepare now, well ahead of the bill’s potential passage.
Token issuers. Map any specific token’s characteristics against the disqualifying financial rights framework. Model the disposition restriction regime’s impact on insider liquidity. Prepare draft disclosure against the anticipated requirements.
Intermediaries. Evaluate the intermediary disclosure pathway. Build or enhance anti-money laundering/countering the financing of terrorism programs to BSA standards. For exchanges operating reward or yield programs on stablecoins, stress test those programs against the “economically or functionally equivalent to deposit interest” standard.
Securities counsel. Develop tracking systems for the 40-plus rulemakings with overlapping comment periods. Identify clients requiring participation in specific comment processes — coordinated control, disqualifying rights, and disposition restriction rulemakings will be particularly high-impact.
With an unprecedented wave of crypto policymaking ahead, the question for market participants isn’t whether these rules will affect them, but whether they will help shape them.
This article does not necessarily reflect the opinion of Bloomberg Industry Group Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.
Author Information
Lewis Rinaudo Cohen is a partner and the co-chair of CahillNXT, Cahill’s digital assets and emerging technology practice.
Sarah Chen is a partner at Cahill and advises clients on all matters in the space of digital assets and emerging technology.
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