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

Greg Xethalis, a lawyer at Multicoin, argues that federal crypto legislation became necessary because state-by-state frameworks were structurally unfit for a global technology. New York's BitLicense, launched in 2014, was the first government regulation of crypto intermediaries, but the underlying state money transmitter rules date to the telegraph era. Operating nationally required licenses from 54 separate entities covering 49 states, the District of Columbia, and four territories, with Montana the sole exception. State regulators were also under-resourced in both dollars and personnel, making a single robust federal regulator more attractive to the industry than 54 underfunded ones.

The legislative history spans nearly a decade. The Token Taxonomy Act was introduced in 2017, followed by the Lummis-Gillibrand Responsible Financial Innovation Act in 2022 and reintroduced in 2024. The House Clarity Act passed roughly one year before the recording. 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. Senator Lummis released a new draft of 620 to 630 pages approximately two hours before the episode was recorded. The bill has been developed on a bipartisan basis by staffers on both sides of the Hill for close to a decade.

The Clarity Act seats digital commodity regulation at the CFTC rather than the SEC, a choice Xethalis supports by arguing that digital assets do not resemble traditional securities despite the Gensler administration's legal theories. The CFTC will gain authority over spot market participants in addition to derivatives, regulating exchanges, custodians, brokers, dealers, large trader reporting, digital commodity pools, and trading advisors. The bill preempts state regulation of digital commodity activity and moves licensing to the federal level, with the CFTC expected to work with the National Futures Association on registration.

A network token is defined as one whose value and operation are determined programmatically by blockchain and smart contract code, 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. The SEC retains principal rulemaking authority over disclosures for both categories. Xethalis notes that digital asset originators lose control of both the token and related information as open-source projects mature, distinguishing them from traditional equities. He describes Chairman Atkins as prioritizing a minimum effective dose of regulation focused on core disclosures, while warning that overly burdensome disclosure rules from the SEC and CFTC are possible if not probable.

Three years before the recording, roughly 80 percent of the regulatory classification field for digital assets was unknown. Xethalis says the bill shrinks the unclear zone to approximately 10 to 20 percent, simplifying classification for around 90 percent of digital assets and transactions. He also argues that under the prior administration companies were disincentivized from disclosing too much, pushing them toward launching assets resembling meme coins. The bill introduces disclosure obligations that were entirely absent from the market before.

The bill includes the Blockchain Regulatory Certainty Act, which restates that writing code is not a crime and provides explicit developer protections, originally crafted by Representatives Tom Emmer and Richie Torres and introduced in the Senate by Lummis and Ron Wyden. A separate title driven by Democratic senators including Mark Warner requires rulemaking to define what does not constitute DeFi, centered on the concept of control. Xethalis frames forcing developers offshore as the best way to lose control over science, technology, and the future. On illicit finance, he argues blockchain transparency makes bad actors easier to catch than legacy tools like suspicious activity reports submitted weeks late and read months after the fact, and the bill enables public-private information sharing partnerships with forensic firms such as Chainalysis, Elliptic, and TRM.

At the time of recording, Polymarket showed a 37 percent chance the Clarity Act is signed into law in 2026, up from 31 percent earlier that week but down from a peak of 49 percent. Senate passage requires 60 votes for cloture, unlike the simple majority needed in the House. Xethalis calls it Schrodinger's bill, saying committed yes votes may not be visible until the floor vote but could exceed 60. Two areas still open in Senate negotiations are ethics language and the treatment of developer protections alongside illicit finance rules for decentralized systems. Xethalis warns that passage is not the destination, because rulemaking afterward will be a fast-moving boulder requiring active industry participation, and he expects significant time to be spent on disclosure rulemaking if the bill is signed within the next month or two.