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

Greg Xethalis, a lawyer and partner at Multicoin Capital with extensive experience in digital asset regulation, argues that federal crypto legislation became necessary because state-by-state frameworks were built for a pre-digital era and are structurally inadequate for a technology that operates nationally and globally. Operating across the US required licenses from 54 entities covering 49 states, DC, and four territories, while state regulators lacked the resources in both funding and personnel to examine crypto businesses effectively. The first government regulation of crypto intermediaries was the New York BitLicense in 2014, and the first federal guidance anywhere was a 2013 FinCEN document on convertible virtual currency that established exchangers and administrators as regulated parties while exempting users and developers, with the key distinction being whether a party exercises unilateral control over a financial system after deployment.

The current bill, the Digital Asset Market Clarity Act, passed the House approximately one year ago under Congressman G.T. Thompson and has Senate sponsors including Tim Scott, Cynthia Lummis, and John Boozman. The Senate Agriculture Committee passed the Digital Commodities Intermediary Act in January, and the Senate Banking Committee passed the Clarity Act two months before the recording. Senator Lummis released a 620-to-630-page draft of the bill approximately two hours before the episode was recorded. Xethalis describes the bill as a bipartisan product of nearly a decade of staff work merging the House Clarity bill with Title I of the Responsible Financial Innovation Act, with the agriculture portion drawing heavily from Senator Klobuchar's Digital Commodities Act.

The bill places digital commodity regulation at the CFTC rather than the SEC, a decision Xethalis supports by arguing that digital assets do not resemble traditional securities despite the legal theories advanced under the Gensler administration. The CFTC would gain authority over spot market participants including exchanges, custodians, brokers, dealers, large trader reporting, digital commodity pools, and trading advisors, likely working with the National Futures Association on registration. The bill preempts state regulation of digital commodity activity, consolidating licensing at the federal level, though money transmission licensing may still apply at the state level in some circumstances.

Xethalis estimates that three years ago roughly 80 percent of the regulatory classification field for digital assets was unknown. He predicts the Clarity Act will reduce the true gray zone to the last 10 to 20 percent of cases requiring major law firm analysis, simplifying classification for approximately 90 percent of digital assets and transactions. A network token is defined as one whose value and operation are determined programmatically by the blockchain or smart contract on which it sits, with decentralization meaning no unilateral control by any party or coordinating group. Ancillary assets, which are tokens sold in capital-raising transactions, face more robust disclosure requirements than network tokens, and the SEC retains principal rulemaking authority over disclosures for network tokens. Chairman Atkins is described as prioritizing a minimum effective dose of regulation focused on core disclosures investors actually need rather than full securities-style reporting.

The bill incorporates the Blockchain Regulatory Certainty Act, originally crafted by Tom Emmer and Richie Torres in the House and introduced in the Senate by Lummis and Ron Wyden, which gives software developers certainty that writing code is not a crime. A title championed by Democratic senators including Mark Warner calls for rulemaking to define what does not constitute DeFi, centered on the concept of control. Two areas still open in Senate negotiations are ethics language and developer protections tied to illicit finance questions around applying law to decentralized systems.

On illicit finance, Xethalis argues that crypto is a poor technology for illegal activity because the blockchain introduces radical transparency and readily available data for forensic analysis, contrasting it with legacy financial systems that rely on suspicious activity reports submitted weeks late and read months after the fact. Firms including Chainalysis, Elliptic, TRM, and Blockade have built substantial blockchain forensics capabilities in response to strong customer demand.

At the time of recording, Polymarket showed a 37 percent probability the bill is signed into law in 2026, having swung from 31 percent to 49 percent and back within a single week. The Senate requires 60 votes for cloture, and Xethalis describes the bill as Schrodinger's bill because committed yes votes may not surface until the floor vote, though he believes yes votes could exceed 60 well beyond the cloture threshold once the bill reaches a vote. He predicts that if signed into law, regulatory clarity will draw more institutions into the space not because the government is endorsing crypto but because defined rules make it easier for regulated entities to participate, and that passage would also give the US leverage to pressure foreign governments to harmonize their rules with American standards.