Senate Republicans Unveil Draft Framework For Digital Asset Market Structure

• Senate Republicans have released the discussion draft for a Digital Asset Market Structure legislation.
• The bill will establish disclosure requirements, establish new rules, and prevent illicit finance, among other provisions.

On Tuesday, the US Senate Republicans have put forward a discussion draft for the Digital Asset Market Structure Legislation. The bill will spell out disclosure requirements for digital asset service providers, establish new rules, promote innovation, while also revamping securities regulations.

“We cannot allow regulatory confusion to continue driving American innovation overseas,” said Senator Lummis. “Market structure legislation will establish clear distinctions between digital asset securities and commodities, modernize our regulatory framework, and position the United States as the global leader in digital asset innovation.”

Market Structure Draft Clarifies Between Ancillary Assets And Securities

By defining ancillary assets, the draft clarified which digital assets do not constitute securities, potentially ending the age-long uncertainty around securities, commodities, and other digital asset classes in-between.

ADVERTISEMENT*“The term ‘ancillary asset’ means an intangible, commercially fungible asset, including a digital commodity, that is offered, sold, or otherwise distributed to a person in connection with the purchase and sale of a security through an arrangement that constitutes an investment contract.”*

Furthermore, it clarified that an ancillary asset does not include assets that afford the owner debt or interest in another person, liquidation rights, or entitlement to interest, dividend, or other such payment or interest as provided by the Securities and Exchange Commission.

“Notwithstanding any other provision of law,” said the document, “an ancillary asset shall not be a security, and secondary transactions in an ancillary asset shall not be considered transactions in securities.”

ADVERTISEMENT## Disclosure Requirements for Ancillary Asset Originators

The Market Structure draft also creates disclosure requirements for offers, sales, or distributions of ancillary assets. An ancillary asset originator will be required to submit a written self-certification backed by credible evidence to the SEC, that the asset does not afford the owner the aforementioned rights over investors.

Ancillary asset originators shall also comply with periodic disclosure requirements such as basic corporate information, important economic information related to the asset such as its utility and prospects, target market, total supply, and governance mechanism.

Draft Handles Illicit Finance, Modernizes Securities Regulation

The Market Structure draft also tackled the highly controversial issue of illicit finance, which has been like a focal point for Democratic opposition to the most recent GOP-led digital asset bills. Popular crypto critic, Senator Warren had criticized the failure of Republicans to include Anti Money Laundering provisions in the GENIUS Act, while asking them to prioritize such rules in the Market Structure Bill.

Consequently, the discussion draft will establish an examination program and standard by which several private entities can collaborate with federal agencies to sniff out and deter the use of digital assets for illicit activity such as money laundering, fraud, theft, child abuse, and dark market transactions.

It will also modernize digital asset securities rules to align with the contemporary economic realities while also promoting responsible banking innovation through decentralized technology. Senate Banking Chair Tim Scott and his colleagues have requested stakeholder feedback on the draft to allow its further development.

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