The Bill That Could Reshape Crypto In America with Greg Xethalis from Multicoin

Greg Xethalis, a lawyer at Multicoin Capital, argues that federal crypto legislation became necessary because state-by-state frameworks were built for a pre-digital era and are structurally unfit for a technology that is national and global in scope. Operating across the US required licenses from 54 entities covering 49 states, DC, and four territories, with Montana being the only state that does not regulate money transmitters at all. State regulators were also under-resourced in both dollars and personnel to examine crypto businesses, making a single robust federal regulator preferable to dozens of underfunded ones.

The legislative history spans nearly a decade, beginning with the Token Taxonomy Act in 2017, followed by the Lummis-Gillibrand Responsible Financial Innovation Act introduced in 2022 and reintroduced in 2024. The Clarity Act passed the House roughly one year before the recording and then moved to the Senate, where it faced more complicated parliamentary procedure and scrutiny from legacy finance interests. The Senate Agriculture Committee passed the Digital Commodities Intermediary Act in January, and the Senate Banking Committee passed the Digital Asset Market Clarity Act two months before the recording. The current Senate version runs approximately 620 to 630 pages and was released by Senator Lummis roughly two hours before the episode was recorded. Xethalis describes the Senate version as a marriage of the House Clarity Act and Title I of the RFIA, combining the strongest elements of each.

The bill resolves a long-standing jurisdictional dispute between the CFTC and the SEC. Previously the CFTC had anti-fraud authority over spot crypto markets but only regulated derivatives, while the SEC regulated spot markets for securities. The bill gives the CFTC a new mandate covering spot market participants including exchanges, custodians, brokers, dealers, digital commodity pools, and trading advisors, with the National Futures Association expected to help administer registration. The SEC retains principal rulemaking authority over disclosures. The bill also preempts state regulation of digital commodity activity, moving crypto-aligned business licenses to the federal level, though some form of state money transmission licensing may persist.

The bill defines two core asset categories. A network token is one whose value and operation are defined programmatically by the blockchain and smart contract code on which it sits, with decentralization meaning the absence of unilateral control by any party or coordinating group. Ancillary assets are tokens sold in capital-raising transactions and face more robust disclosure requirements than network tokens. Xethalis acknowledges the bill does not resolve every question about tokens launched via smart contract, but estimates that three years ago roughly 80 percent of the regulatory field for digital assets was unknown, and the bill reduces that to approximately 10 to 20 percent remaining unclear.

The bill includes a title driven by Democratic senators including Mark Warner calling for rulemaking to define what does not constitute DeFi, with the concept of control expected to be central to that Treasury rulemaking. The Blockchain Regulatory Certainty Act, incorporated into the bill and originally crafted by Representatives Tom Emmer and Richie Torres, provides that writing code is not a crime, which Xethalis describes as a restatement of existing law tracing back to FinCEN's 2013 guidance establishing that users and developers are not regulated parties while exchangers and administrators are. Two areas still open in Senate negotiations at the time of recording are ethics language and the treatment of developer protections alongside illicit finance rules for decentralized systems.

At the time of recording, Polymarket showed a 37 percent chance the bill gets signed into law in 2026, having moved from 31 percent to 49 percent and back within the same week. The Senate requires 60 votes for cloture versus a simple majority in the House, and Xethalis does not expect 60 committed yes votes to be visible until the bill is actually on the floor, describing it as a Schrodinger's bill whose fate will only be known when the vote occurs. He also raised the possibility that yes votes could exceed 60 well beyond the cloture threshold once the bill reaches the floor, and stated directly that he believes the industry is going to win.

Xethalis warns that passage is not the destination. Significant rulemaking authority is assigned to the CFTC, SEC, and Treasury after enactment, and he predicts rulemaking will move quickly and require active participation from both traditional finance and the developer community. He cautions that the industry risks being overburdened if rulemaking is not properly rightsized, and argues that forcing builders offshore is the surest way to lose control over science and technology. Regulatory clarity will bring more institutions into crypto not because the government is blessing the asset class but because it lowers barriers for regulated entities to engage, while Xethalis emphasizes that legitimacy ultimately comes from building products that work, not from legislation itself.