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Digital Commodity Intermediaries Act

· 9 min read
Dora Noda
Dora Noda
Software Engineer

For the first time in history, a comprehensive crypto market structure bill has advanced through a U.S. Senate committee. The implications for exchanges, custody providers, and DeFi protocols are about to become real.

On January 29, 2026, the Senate Agriculture Committee voted 12-11 along party lines to advance the Digital Commodity Intermediaries Act—marking a watershed moment in the decade-long quest to bring regulatory clarity to digital assets. The legislation would grant the Commodity Futures Trading Commission (CFTC) primary oversight of digital commodities like Bitcoin and Ether, creating the first comprehensive federal framework for spot crypto markets.

The End of Regulation by Enforcement​

Since Bitcoin's emergence in 2009, crypto markets have operated in a regulatory gray zone. The SEC pursued enforcement actions against projects it deemed securities. The CFTC had limited authority over derivatives but not spot markets. State money transmitter laws created a patchwork of compliance requirements. The result: billions of dollars in trading volume migrating offshore to escape unclear U.S. rules.

The Digital Commodity Intermediaries Act changes this calculus fundamentally. Building on the House's CLARITY Act—which passed with bipartisan support in July 2025—the legislation establishes clear jurisdictional boundaries:

  • CFTC gets exclusive jurisdiction over spot digital commodity markets
  • Bitcoin, Ether, and similar assets are formally defined as commodities, not securities
  • Crypto exchanges, brokers, dealers, and custodians must register with the CFTC
  • Consumer protection requirements including asset segregation and conflict-of-interest safeguards become mandatory

"This is a critical step toward creating clear rules for digital asset markets," Senator John Boozman, the bill's sponsor and Agriculture Committee Chairman, said after the vote. "There's still more work ahead, but this will build momentum in the Senate."

What the CFTC Framework Looks Like​

The registration regime under the Digital Commodity Intermediaries Act is comprehensive. Platforms facilitating trading, brokerage services, or custody for digital commodities must implement:

Operational Requirements:

  • Customer asset segregation from platform funds
  • Minimum capital and financial resource standards
  • Cybersecurity and operational resilience protocols
  • Governance controls and compliance programs
  • Market surveillance systems to detect manipulation

Consumer Protections:

  • Full disclosure of fees, risks, and conflicts of interest
  • Prohibition on undisclosed use of customer assets for staking or lending
  • Express written consent required for any "blockchain services" using customer funds
  • Clear rules on affiliate and proprietary trading

Registration Timeline: The legislation provides for expedited registration with provisional status for digital commodity brokers, dealers, and exchanges. All rulemakings must be promulgated within 18 months of enactment.

The CFTC has already begun preparing for expanded authority. In December 2025, the agency launched a digital assets pilot program allowing Bitcoin, Ether, and payment stablecoins to be used as collateral in derivatives markets. CFTC Chairman Michael Selig announced a comprehensive review of existing rules to "modernize requirements and ensure a level playing field for new entrants and incumbents alike."

The DeFi Question Remains Open​

Perhaps the most contentious aspect of the legislation is its treatment—or non-treatment—of decentralized finance protocols.

The House's CLARITY Act included explicit carve-outs for DeFi activities. Developers creating truly decentralized protocols wouldn't need to register as intermediaries simply for "operating code, nodes, wallets, interfaces, or liquidity pools." This protection was critical for the DeFi ecosystem's survival under U.S. jurisdiction.

The Senate's Digital Commodity Intermediaries Act incorporates definitions relating to blockchain and decentralized finance from the CLARITY Act, including "exclusions for a person or group of persons under common control with respect to decentralized governance systems." However, legal analysts note the bill "still leaves open the treatment of DeFi protocols."

The carve-outs don't eliminate regulatory authority entirely. Both the SEC and CFTC retain anti-fraud and anti-manipulation powers that apply regardless of whether an entity claims to be "just software" or "just a front end."

The Senate Banking Committee's competing amendment takes a harder line. Its Title III would direct the SEC and Treasury to issue rules clarifying how a "person or group in control of a trading protocol" should register. Crypto intermediaries using DeFi protocols would need to implement risk management standards, with compliance verified through examinations.

The Path Forward: Banking Committee Bottleneck​

The Agriculture Committee vote is historic—but it's only the first Senate hurdle. The Banking Committee must approve its version of a crypto market structure bill before the two measures can combine and advance to the full Senate.

That process hit a snag. The Banking Committee's consideration of its version, originally scheduled for January 15, was postponed at the last minute after opposition from the crypto industry, including Coinbase. A new date hasn't been set.

Democrats offered amendments during the Agriculture Committee markup that would have:

  • Banned public officials (including the president) from engaging in the crypto industry
  • Addressed foreign adversary involvement in digital commodities

None were approved, with Boozman ruling them outside the committee's jurisdiction.

The partisan split is notable. After years of bipartisan crypto legislation—the CLARITY Act and GENIUS Act both passed the House with Democratic support—the Senate version advanced on a straight party-line vote. Whether that opposition hardens or softens as the bill moves through the process will determine its ultimate fate.

Industry experts estimate a 50-60% chance the legislation passes before the November 2026 midterms. Election-year politics and potential government funding deadlines could slow progress, but the pressure to establish U.S. crypto rules before more activity migrates offshore is mounting.

Institutional Implications​

The legislation arrives as traditional finance accelerates its crypto integration. The regulatory clarity it provides could unlock significant institutional capital:

For Exchanges: CFTC registration creates a legitimate path to serve U.S. customers with spot digital commodity trading. The alternative—operating offshore or navigating state-by-state licensing—becomes less attractive.

For Custody Providers: The "qualified digital asset custodian" designation under CEA supervision provides a federal framework that institutional allocators require before parking client assets.

For Banks: The bill complements the GENIUS Act's stablecoin framework by clarifying that digital commodities aren't securities—removing a major compliance uncertainty for institutions exploring crypto custody or trading services.

For DeFi: The outcome is mixed. Legitimate carve-outs exist, but uncertainty around "control" definitions and the Banking Committee's harder stance create ongoing risk for protocol developers and DAOs.

Regulatory Coordination Takes Shape​

On January 29—the same day as the Agriculture Committee vote—SEC Chairman Paul Atkins and CFTC Chairman Michael Selig held a joint event at CFTC headquarters to discuss interagency harmonization. The symbolism was intentional: after years of turf battles over crypto jurisdiction, the agencies are signaling coordination.

The Digital Commodity Intermediaries Act mandates joint rulemakings by the SEC and CFTC for:

  • Exchanges and intermediaries handling both securities and commodities
  • Mixed digital asset transactions
  • Portfolio margining
  • Conflicts of interest

This requirement addresses one of the crypto industry's longest-standing complaints: that regulatory ambiguity forced platforms to either pick a side (SEC or CFTC) or operate outside both agencies' frameworks.

The SEC's "Project Crypto" initiative includes forthcoming "Regulation Crypto" with 2026 rulemakings for a comprehensive framework. An "innovation exemption" will provide time-limited waivers of certain regulatory obligations—potentially giving U.S. institutions confidence that partnering with DeFi projects won't be undermined by future enforcement actions.

State-Level Coordination​

Federal legislation doesn't preempt all state authority. California's Digital Financial Assets Law (DFAL) takes effect July 1, 2026, requiring crypto companies to obtain licenses from the Department of Financial Protection and Innovation. Penalties for unlicensed activity reach $100,000 per day.

The interaction between federal CFTC registration and state licensing requirements will need clarification. The CLARITY Act's original text faced criticism for provisions that some argued "legally ban oversight that catches front-end manipulation" at the state level. How these tensions resolve will shape the compliance burden for crypto firms operating nationally.

What Happens Next​

The legislative calendar is tight:

Q1 2026: Banking Committee schedules its markup. Industry lobbying intensifies around DeFi provisions and public official restrictions.

Q2-Q3 2026: Assuming both committees advance bills, the full Senate considers a blended version. Reconciliation with the House's CLARITY Act begins.

Before November 2026: Target deadline for final passage. Midterm election dynamics could accelerate or derail the process.

18 Months Post-Enactment: CFTC completes rulemakings. Registration regime becomes operational.

The Digital Commodity Intermediaries Act represents the most significant potential shift in U.S. crypto regulation since the asset class emerged. Whether it becomes law depends on navigating partisan divisions, reconciling House and Senate approaches, and resolving the DeFi regulatory question that has eluded policymakers for years.

For an industry built on decentralization, the next six months will be decidedly centralized—in the halls of Congress.

BlockEden.xyz provides enterprise-grade blockchain infrastructure across 30+ networks, including RPC endpoints and indexed data services that meet the compliance and reliability standards institutional participants require. As regulatory clarity emerges, explore our API marketplace to build on infrastructure designed for the institutional era.

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