Latest Developments in US Encryption Regulations: New Bill Draft Seeks to Clarify SEC-CFTC Roles and DeFi Rules

U.S. Senators have released a revised draft of the "2025 Responsible Financial Innovation Act," aimed at clarifying the regulatory boundaries between the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). The new bill provides legal protection for Decentralized Finance (DeFi) developers, validators, and activities such as airdrops and staking rewards. Additionally, the draft incorporates Decentralized Physical Infrastructure Networks (DePIN) and tokenization of real-world assets into the federal legal framework for the first time, which is seen as a key step towards the maturity of U.S. crypto regulation.

New bill clarifies SEC and CFTC responsibilities, establishes a joint advisory committee

The updated draft of the bill aims to reduce regulatory overlap and eliminate unnecessary friction by clearly defining the powers of the SEC and CFTC. The draft proposes the establishment of a "Digital Asset Joint Advisory Committee" composed of members from both agencies. Although the committee's recommendations are not legally binding, the bill requires both agencies to publicly respond to each of the committee's findings or recommendations, thereby promoting regulatory transparency and coordination.

SEC Chairman Paul S. Atkins and CFTC Acting Chair Caroline D. Pham stated in a joint statement: "The SEC and CFTC must work together to reduce regulatory overlap, eliminate unnecessary friction, and support innovation." The two agencies also plan to hold a public roundtable on September 29 to further discuss coordination efforts.

Legal Protection for DeFi Developers and Airdrops

An important highlight of the new bill draft is that it provides clear legal protections for developers and users in the Decentralized Finance (DeFi) space. As long as the protocol is not under centralized control, developers, validators, liquidity providers, wallet builders, and infrastructure contributors who contribute code to decentralized protocols will not automatically be subject to traditional financial regulations.

This clause is a response to concerns raised by the conviction of Tornado Cash co-founder Roman Storm and other legal actions. Critics argue that the case blurs the line between software development and criminal liability, sounding the alarm throughout the developer community.

The bill also aims to alleviate concerns about regulatory issues arising from common encryption activities. The bill defines airdrops, staking rewards, and liquidity staking yields as "non-compensatory distributions," which should not be considered as securities issuance under current law, thereby protecting users from unexpected legal risks.

DePIN and tokenization assets receive federal legislative attention for the first time

The new draft clarifies for the first time the status of Decentralized Physical Infrastructure Networks (DePIN) at the federal law level. Tokens powering these networks will be exempt from securities classification, provided that no single entity controls more than 20% of the token supply. This "safe harbor" provision is intended to support the development of decentralized telecommunications, storage, and sensor networks that rely on community participation.

In addition, the bill also mentions the tokenization of real-world assets (RWA), stating that the act of tokenizing non-securities does not automatically make them securities. The bill directs regulators to study the verification, custody, auditing, and enforcement standards for RWAs to address the growing number of financial institutions exploring blockchain-based asset issuance.

One of the main authors of the bill, Senator Cynthia Lummis, stated that the goal is to submit a final version coordinated with the Clarity Act passed by the House in July to President Trump for signing by the end of the year.

Conclusion

The release of the draft "Responsible Financial Innovation Act of 2025" marks a key step for the United States in establishing a comprehensive regulatory framework for encryption. It aims to end the long-standing "regulatory arbitrage" and uncertainty by clearly defining the responsibilities of regulatory agencies and providing legal protections for emerging areas like Decentralized Finance (DeFi). (7)

If the bill is ultimately passed, it will greatly reduce the compliance risks for the cryptocurrency industry in the United States and may attract more innovation and capital to stay domestically. Although there are still challenges in coordinating the bill versions in both the House and Senate, the introduction of this draft undoubtedly paints a clearer and more positive picture for the future of the U.S. cryptocurrency industry.