Lawmakers have introduced a long-anticipated bill on cryptocurrency market structure. Here’s its significance for digital assets and what to expect next.

The Senate Agriculture Committee has put forward a draft of its long-anticipated bill concerning the structure of digital asset markets. This represents a significant movement toward encouraging both institutional and individual adoption of cryptocurrencies.

Released on Monday by Agriculture Chairman John Boozman (R-Ark.) and Sen. Cory Booker (D.N.J.), the bipartisan draft sets the stage for establishing a regulatory framework for the U.S. cryptocurrency sector. It also outlines guidelines for institutions aiming to handle digital assets, covering everything from Bitcoin and Ether to tokenized financial products.

Cody Carbone, CEO of the Digital Chamber, explained to CNBC that this is a crucial blueprint for financial institutions looking to incorporate digital assets. “It seems like a detailed step-by-step guide on compliance rules that one must follow when working with cryptocurrencies,” he noted.

Here are five key insights from the draft.

The bill categorizes major digital assets, such as Bitcoin and Ether, as “digital products” and places them under the Commodity Futures Trading Commission’s jurisdiction.

Juan Leon, an analyst at Bitwise, mentioned to CNBC that this could eliminate significant barriers for institutional investors entering the cryptocurrency space. He suggested that this clarity is essential for compliance and risk departments, stating, “It changes the internal dialogue, offering the legal certainty needed for strategic allocation of assets.”

Moreover, it would result in a distinctly divided market comprising both regulated and unregulated tokens. The regulated category could attract substantial institutional investment, enhanced liquidity, and a robust derivatives market.

The draft mandates that crypto firms create separation in governance, personnel, and financial resources for entities that undertake different regulatory roles.

According to Leon from Bitwise, this represents a challenge to the “all-in-one” model prevalent among many cryptocurrency exchanges today. Essentially, companies might need to operate distinct businesses akin to traditional financial institutions, creating a foundational aspect for institutional adoption.

The document empowers the CFTC, allowing it to collaborate with the SEC to issue joint regulations on virtual currency matters.

This development is seen as a way to enhance the CFTC’s authority in overseeing the industry, particularly since the SEC has previously held primary regulatory control over digital assets.

The draft stipulates that regulated firms will need to pay fees to the CFTC. These fees will support the monitoring of regulated entities, educational outreach, and the registration of digital commodity exchanges, brokers, and dealers.

The proposal urges cryptocurrency exchanges to permit trading only in digital products that are “not easily manipulated.”

This regulation aims to mitigate risks of scams and “rug pulls,” and it seeks to build trust within the market.

Carbone pointed out that while this draft from the Senate Agriculture Committee is just the beginning, it offers valuable insight into the potential pathway for more favorable regulations regarding cryptocurrencies in the U.S. He mentioned, “It’s not final, but it gives an idea of Congress’s direction.”

In the coming weeks, the committee will solicit feedback on the draft, which could make it quite challenging to finalize opinions on this part of the proposed legislation. Nevertheless, this timeframe provides lawmakers with a chance to clarify areas that are still ambiguous, such as anti-money laundering rules and regulations for decentralized finance operators.

Some in the crypto community plan to work closely with Congress to iron out these details. Moonpay President Keith Grossman emphasized that the bipartisan nature of this draft reflects the importance of clearly differentiating centralized intermediaries from decentralized systems.

According to Carbone, this draft is just one element of a broader legislative effort aimed at overhauling cryptocurrency regulations. The Senate Banking Committee also has a draft that will likely be combined with this one into a single comprehensive bill.

While progress may seem slow, crypto firms are actively seeking ways to collaborate with regulators. Craig Sahm from Grayscale Investments noted that even in the absence of comprehensive legislation, significant advancements are being made on the regulatory front. He stressed that thoughtful legislation is vital to laying a solid foundation for the U.S. digital asset industry.