Senate Banking Committee Democratic staff slam GOP crypto draft bill as 'superhighway' for dodging regulation

Democratic staff in the U.S. Senate Banking Committee say Republican counterparts' cryptocurrency draft bill creates a "superhighway" for assets looking to skirt regulators' authority.

In a fact sheet released on Monday, the Senate Banking Committee's Democratic staff warned that the Republicans' draft version of rules for the industry misses the mark.

"Most concerningly, the bill provides a superhighway for traditional assets to escape the SEC’s authority simply by converting stocks and other non-crypto securities into tokens," according to the fact sheet.

The top Democrat on that committee, Sen. Elizabeth Warren, has previously criticized the House's version for "language that would allow non-crypto companies to tokenize their assets to evade the SEC’s regulations." The House passed the Digital Asset Market Clarity Act in July, which would create a regulatory framework for crypto in part through designating how the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission will regulate digital assets.

In the Senate Banking Committee Republican version released last month, the term "ancillary assets" is now raising concerns.

Senate Republicans defined ancillary assets as being an "intangible, commercially fungible asset, including a digital commodity, that is offered, sold, or otherwise distributed to a person in connection with the purchase and sale of a security through an arrangement that constitutes an investment contract." Senate Democratic staff on Monday said the term was not limited to crypto and would allow firms to sell assets to investors without protections.

"Even for Americans who invest in non-crypto companies, this would mean exposing their retirement accounts and investments to greater volatility while stripping away existing federal and state enforcement tools to protect and help investors who get scammed," they said.

Companies in the U.S. have been ramping up efforts to bring tokenized stocks to the U.S. If they receive approval from the SEC, that could enable them to offer blockchain-based trading of traditional stocks, putting them in direct competition with other, more traditional finance brokerages. SEC Chair Paul Atkins has described tokenization as an "innovation" that could lead to more efficient markets. SEC Commissioner Hester Peirce drew a line last month in saying "tokenized securities are still securities."

Senate Democratic staff also raised concerns about President Donald Trump's crypto ventures and said the draft version "fails to rein" that in. Trump and his family's involvement with crypto has been an ongoing concern among many Democrats. Bloomberg estimated last month that the sitting president has profited some $620 million from his family's crypto ventures, including the World Liberty Financial DeFi and stablecoin project and the TRUMP and MELANIA memecoin launches. The Trump family also has a 20% stake in the mining firm American Bitcoin, which is expected to go public.