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Why It Matters
The Congressional Research Service report “Cryptocurrency: Regulatory and Legislative Policy Issues,” dated May 29, finds that cryptocurrency regulation remains divided among agencies, statutes, and shifting administrative interpretations. The market capitalization of cryptocurrencies reached $4 trillion in October 2025 and stood at approximately $2.5 trillion in March 2026, while Bitcoin and Ether together represented roughly 70 Percent of the market. That scale places consumer protection, market integrity, and the treatment of digital assets before Congress without an overarching federal framework covering issuance, trading-market structure, financial-law relationships, and asset classifications.
For the Trump administration, the policy direction differs significantly from that of the Biden administration, with the report describing a shift toward less restrictive application at the agencies.
The Big Picture
Cryptocurrencies can be held and transacted through software and networks without banks or other financial intermediaries, and the report characterizes them as pseudonymous, decentralized, and permissionless assets. Developers, individuals, and companies may raise capital by selling tokens usable on a blockchain, after which those assets may trade on secondary markets such as cryptocurrency exchanges. Depending on their attributes and the criteria applied, individual cryptocurrencies may be classified as securities, commodities, or another type of asset, and that classification can determine which laws apply and whether existing authority is adequate.
The Securities and Exchange Commission has authority over cryptocurrencies that are securities, while the Commodity Futures Trading Commission may regulate futures and derivatives markets based on commodities such as qualifying virtual currencies and has only limited anti-fraud and anti-manipulation authority over commodity spot markets. In March, the SEC and CFTC issued guidance identifying categories including digital commodities, collectibles, digital tools, stablecoins, and digital securities, and said only digital or tokenized securities among those categories qualify as securities.
The 119th Congress has considered stablecoin legislation separately from market-structure legislation, enacting the GENIUS Act as Public Law 119-27 in July 2025 and weighing additional measures for non-stablecoin activities and intermediaries. The GENIUS Act established a regulatory structure for payment stablecoins, while the House-passed CLARITY Act of 2025, H.R. 3633, would provide a regulatory framework for broader cryptocurrency market structure. Senate proposals and the CLARITY Act would divide responsibilities among agencies, giving the SEC authority over certain primary sales and the CFTC, for the most part, exclusive jurisdiction over contracts and transactions involving digital commodities.
Those bills would use modified regulatory frameworks, including an exemption from most securities-law registration requirements for firms raising less than $50 million annually in the described circumstances. Congress is also debating taxonomies based on decentralization, expectations of return, managerial efforts, and blockchain maturity, while the report notes that a cryptocurrency’s regulatory status can change.
The policy choices extend beyond classification because most exchanges operate simultaneously as trading venues, broker-dealers, and custodians, and proposed legislation would impose registration and other requirements on intermediaries involved in spot transactions.
The Bottom Line
Decentralized finance uses software, including unhosted wallets and smart contracts, to let users hold, trade, or borrow assets in a decentralized manner, and its financial activities and services are intended to be conducted without intermediaries; there is currently no overarching legislative or regulatory framework for it. The House-passed CLARITY Act would leave decentralized-finance activities outside its provisions and would not regulate several activities, including developing, publishing, or maintaining a blockchain system or decentralized-finance trading protocol. That approach could create different treatment for similar activities, with regulatory status turning on the platform or participant rather than only on what the activity does.
At the same time, the report says there is no consensus about the magnitude of illicit digital-asset use, and the Treasury’s 2024 assessment placed virtual-asset money laundering far below laundering through fiat currency and conventional non-virtual-asset methods.
The next congressional test is therefore not simply whether to regulate crypto, but how to assign authority, define categories, protect users, and preserve room for software-based systems that do not fit existing financial models.
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Source: legis1.com