Crypto legislation reaches new turning point: House of Representatives and Senate set a different course

The U.S. legislative process around crypto markets is reaching a critical moment, while the House of Representatives and the Senate are taking significantly divergent approaches to regulating digital assets. After years of limited success in legislative initiatives, the sector is now faced with the reality that two different regulatory frameworks are taking shape simultaneously.

On Wednesday, the Senate Agriculture Committee unveiled its own draft bill on the market structure of crypto, with a hearing scheduled for next Tuesday. This initiative follows controversial negotiations within the Senate Banking Committee last week, where a last-minute marking was postponed. This contradiction illustrates the profound disagreement over how best to regulate the crypto sector.

Two Senate committees, two directions

The current situation shows how fragmented the Senate approach has become. While the Agriculture Committee presents a more pro-crypto, Republican-oriented version that would shield tech developers from regulation as financial services companies, the Banking Committee remains stuck in fundamental disagreement over key issues.

The committee chair John Boozman emphasized that while significant policy differences still exist, the current bill builds on months of negotiations and input from all relevant stakeholders. “It is time to move this proposal forward,” Boozman said, indicating that the Agriculture Committee is not prepared to wait any longer for consensus.

This is in stark contrast to the House of Representatives, which had already passed the similar Digital Asset Market Clarity Act last year. So that chamber has already shown that it is willing to pass passenger crypto legislation, while the Senate is still struggling with internal disagreement.

Core conflicts around stablecoins and CFTC authority

One of the most controversial sticking points in the Senate Banking Committee concerns the issue of whether stablecoins can offer rewards to customers. Bank lobbyists argue that this would undermine the fundamentals of the deposit system by US banks. This issue became so serious that Coinbase withdrew its support for the bill last week, just hours before the scheduled marking.

The Agriculture Committee version avoids some of these most explosive topics, which helps to make that route less politically charged. Rather, the proposal focuses on strengthening the Commodity Futures Trading Commission’s (CFTC) position as a regulator of spot markets for non-security tokens, and maintaining legal liability protection for decentralized finance (DeFi) platforms.

DeFi Regulation: Where Consensus Ends

From the outset, a core mission of the crypto industry has been to create legal space within which DeFi can flourish without restrictions that are practically impracticable. However, this turned out to be a point of contention where the two sides cannot meet.

Democrats have continually objected that decentralized platforms cannot adequately provide consumer protections under their current structure. The securities industry counters that DeFi entities should be regulated in the same way as traditional financial firms — a position that DeFi proponents label as fundamentally impossible. This philosophical divide is at the heart of why the Senate legislative process is moving much slower than the House of Representatives, which has been quicker to decide not to push through full regulation.

Industry Explores Pudgy Penguins Strategy and Broader Implications

Parallel to the legislative discussions, the emergence of projects such as Pudgy Penguins shows how the industry is evolving beyond purely financial models. The NFT-native brand has shifted from speculative “digital luxury goods” to a multi-vertical consumer platform. With over $13 million in retail sales, over 1 million units sold, and over 500,000 downloads from Pudgy Party within two weeks, the project demonstrates how Web3 adoption can grow across mainstream channels.

However, this kind of innovation drives the same regulatory questions: how do you adapt existing frameworks for entities that contradict traditional categorizations?

Outlook: Waiting for the next phase

Before the legislation formally takes effect, the final version of any Clarity Act variant must have at least seven Democratic senators on board. If it passes the Senate, observers expect that the House of Representatives would accept it without question, given their previous move in that direction.

A plenum, as scheduled for Tuesday, offers Democrats the opportunity to submit amendments. A further opportunity arises when the two Senate versions — the Agriculture version and the final banking version — have to be merged into a single piece of legislation.

The CFTC Chair Mike Selig, meanwhile, indicated that his committee will pursue various policies, including those related to crypto definitions, tokenized collateral, and prediction markets. This signals that regulatory harmony between institutions is also becoming an important factor in how these laws ultimately function.

President Donald Trump promised an international audience in Switzerland on Wednesday that the U.S. will soon draft a comprehensive crypto law. Patrick Witt, top White House krypto adviser, stressed: “It’s a matter of when, not if. A multi-trillion-dollar industry without a regulatory framework is pure fantasy.”

While the House of Representatives has already made progress, the Senate is still waiting for real progress and bipartisan cooperation that seemed much more natural earlier in the process.