Original Title: "IOSG Weekly Brief | Policy Shift and Market Reform: Analysis of the U.S. Cryptocurrency Regulatory Framework #291"

Original Author: Sam, IOSG Ventures

Introduction

Over the past three years, the U.S.'s stance on cryptocurrency has undergone a significant shift—from an early emphasis on enforcement-led regulation and a relatively unfriendly attitude to a more constructive regulatory model focused on rule-making. This policy shift has not only been a key driver in promoting widespread cryptocurrency adoption but also a critical catalyst for advancing the industry into its next stage of growth.

For investors, the current key developments to focus on include the formal enactment of the "GENIUS Act," which has established a foundational regulatory framework for payment-type stablecoins; the House-passed "CLARITY Act," which will define the standards for tokens falling under the jurisdiction of either the Commodity Futures Trading Commission (CFTC) or the Securities and Exchange Commission (SEC); an executive order pushing regulatory agencies to open up 401(k) plans as investment channels for crypto assets; and the House-passed reform proposal for accredited investor exams, which is set to broaden the access of private crypto trading participants.

CLARITY Act

The CLARITY Act establishes as its core standard the maturity of a blockchain system to determine whether it has received SEC certification as a "mature system," clearly delineating whether digital assets should be classified as "digital commodities" (under CFTC jurisdiction) or securities (under SEC jurisdiction). If a system is certified as mature, its native token can be traded as a digital commodity under CFTC oversight; other on-chain assets will maintain their original attributes.

What is a "Mature System"?

The Act specifies seven criteria for determining "maturity":

· System Value: Market value is driven by actual adoption/use, with a fundamentally sound value mechanism

· Functional Completeness: Transactions, services, consensus mechanisms, and node/validator operations are all in real-time operation

· Openness and Interoperability: The system is open-source, with no unilateral exclusivity restrictions on core activities

· Programmable System: Rules are enforced by transparent code (no discretionary operations)

· System Governance: No single entity/group can unilaterally modify on-chain rules or control ≥20% of the voting power

· Fairness: No special privilege (only allowed through a decentralized process for repair/maintenance/security operations)

· Distributed Ownership: Issuer/Affiliate/Related Parties combined ownership <20%

The table below summarizes the key differences in actual regulation between digital commodities (CFTC jurisdiction) and securities (SEC jurisdiction). The CLARITY Act framework largely continues the existing regulatory division of labor but provides a clear path for assets to transition from SEC to CFTC jurisdiction—once the underlying chain meets the above maturity criteria, the relevant digital commodities can move into the CFTC regulatory system.

With the establishment of a legal framework, the practical key lies in the specific impact of the "CLARITY Act" on various crypto areas.

Staking Services

According to the framework of the "CLARITY Act," pure on-chain staking—meaning running a validator/sealer and issuing native rewards—does not require registration with the SEC. This "safe harbor" covers validator/node operation and the distribution of protocol rewards to end users.

However, this exemption does not involve activities that involve financing through minting or selling new staking derivative tokens. Projects still need to obtain timely blockchain accreditation and always bear anti-fraud and disclosure obligations.

Review of MetaMask/Lido/Rocket Pool events: The non-custodial ministerial-style (i.e., only executing the protocol's established rules without autonomous decision-making power) reward distribution model more closely aligns with the security zone standard of the "CLARITY Act." In contrast, models like the fund-pooling, custodial, revenue commitment model similar to Kraken at the time will still be considered a securities issuance, and if not rectified and relaunched, will face the same regulatory issues.

Regarding Liquidity Staking Tokens (LST): Only vouchers reflecting a 1:1 ratio of user staked assets and protocol rewards belong to the ministerial-style end-user distribution category. However, if it involves strategy choices (such as re-staking/AVS allocation), overlay points/additional rewards, or the issuance of pooled and redistributed revenue management tokens/shares, such models fall under a managed investment claim. Unless they meet exemption terms, they still fall under SEC jurisdiction.

Decentralized Exchange (DEX)

DEXs offering on-chain spot trading of native blockchain tokens (such as BTC, ETH, governance, or utility tokens) are exempt from exchange registration for spot trading of exempt tokens. Operating core DEX smart contracts, order book logic, matching engines, or AMM factories are not considered "exchange" activities as defined by the Securities Exchange Act—hence, there is no need to register as an exchange or broker-dealer for the spot trading of exempt tokens.

However, platforms involving derivatives (futures, options, perpetual contracts), security tokens (on-chain stocks), or real-world asset tokens (such as gold) are still fully regulated by the SEC or CFTC.

Payment of protocol fees to liquidity providers (LP) or users contributing work/assets falls under the end-user allocation category and is subject to the DeFi exemption channel of the "CLARITY Act." It is important to note that this act did not alter the securities classification standards. If a governance token (such as UNI) distributes cash or profits to holders solely based on holding behavior, it would constitute a profits interest and is likely to be deemed a security under the Howey Test (reliance on the efforts of others for profit expectation). In such cases, revenue sharing and secondary trading of the token would fall under SEC regulation.

Decentralized Stablecoin

The Collateralized Debt Position (CDP) model (locking collateral to mint a stablecoin pegged to the dollar) falls under SEC jurisdiction in the initial stages: Tokens pegged to value exchange are considered investment contracts until the protocol receives mature blockchain certification. Early-stage teams can still fundraise under the first issuance exemption clause of the "CLARITY Act" — up to a maximum of $50 million within a rolling 12-month period — but must fulfill cryptocurrency-specific disclosure obligations and a full-cycle anti-fraud responsibility over four years. When governance is fully on-chain and no single entity controls ≥20% of the voting rights or collateral, the protocol can apply for mature certification; thereafter, governance tokens and mint/burn mechanisms will fall under CFTC oversight for digital commodities, no longer subject to SEC securities regulations.

The Delta Neutral model is different: Due to its reliance on crypto collateral and derivative risk exposure and revenue distribution mechanisms, it does not fall under the "CLARITY Act" exemption for spot commodities, even if the underlying chain is mature; it also does not fit into the "GENIUS Act" framework of a "permissioned payment stablecoin."

Lending Business

Lending falls under the credit category rather than spot trading, and therefore is not covered by the "CLARITY Act" spot commodity exemption clause. Unless citing exemption provisions (D Rule/S Rule), interest-bearing deposit certificates from fund pooling are considered under securities regulation.

Yield Aggregator

Immutable and non-custodial aggregator contracts (not unilaterally modifiable by a single entity) do not need to register as a trading platform or intermediary.

However, any governance token or vault share certificate that grants holders future revenue rights constitutes an investment contract at issuance. Furthermore, complex custody strategies may trigger multiple registration requirements: If rebalancing or control is off-chain or controlled by a centralized operator, the project will lose its DeFi exemption status and trigger compliance obligations for brokers/dealers or exchanges.

ETF Pledge Business

The CLARITY Act provides support at a fundamental level: for the first time, the act explicitly legislates that pledge rewards are considered "end-user allocation" (non-securities) and allows networks to transfer their native tokens to CFTC oversight once certified as "mature." This eliminates a core securities law barrier to intrafund transfer protocol revenue.

However, ETFs still need to comply with fund regulatory rules. There are two major constraints: firstly, the Investment Company Act liquidity rule (Rule 22e-4) stipulates that "illiquid assets" cannot exceed 15% of net asset value; if an asset cannot be liquidated at close to its carrying value within 7 calendar days, it is classified as an illiquid asset. Native pledge positions with an unbonding/exiting queue mechanism typically fall into this category.

Secondly, if a product is a registered open-end ETF, it must follow the 1940 Investment Company Act's diversification requirements: the well-known 75/5/10 rule means that the pledge risk exposure and validator relationships cannot be concentrated on a single "issuer" or operator. In practice, this requirement necessitates a multi-validator split strategy and precise control of scale, ensuring that no more than 75% of assets have a counterparty exceeding the 5%/10% thresholds (some crypto ETPs circumvent this limit through non-'40 Act structures, but most pledge ETFs are still registered under the '40 Act and employ a Cayman subsidiary structure).

GENIUS Act

In July 2025, the United States officially enacted the GENIUS Act—the first comprehensive federal law regulating stablecoins.

The act restricts issuance eligibility to regulated entities and establishes core rules on prudent operation, code of conduct, anti-money laundering, and bankruptcy disposition. Its key admission requirement is: "Other than licensed payment stablecoin issuers, no entity may issue a payment stablecoin in the United States."

As per the act's requirements, issuers must hold 100% reserve assets, limited to the following three categories:

· US dollars or Federal Reserve bank deposits

· Short-term US Treasury securities maturing in less than 93 days

· Overnight repurchase agreements backed by Treasury securities

Under section (7)(A) on "Payment Stablecoin Activities Restriction," licensed issuers may only engage in the following activities:

· Issuing payment stablecoins

· Redeeming payment stablecoins

· Managing related reserve assets (including buying and selling in compliance with the law, holding reserve assets, or providing custody services)

· Legally provide stablecoin, reserve asset, or private key custody services

· Engage in affiliated businesses directly supporting the above activities

This strict list has a clear regulatory intent: by isolating stablecoin operations from high-risk activities, it ensures redemption security. The bill specifically states that "payment stablecoin reserve assets may not be pledged, rehypothecated, or reused." This means that banks, even if using their own issued tokenized assets, cannot include them in the reserve collateral for lending operations.

With the GENIUS Act clarifying issuance qualifications and reserve rules, multiple industries are transitioning from pilots to scalable applications:

· Banking: Despite facing competition from tokenized cash deposits, banks become natural issuers due to their regulatory structure advantage. The most likely path is starting from enterprise use cases, whitelisted counterparties, and conservative liquidity management policies through bank subsidiaries or strict regulatory bank-tech company partnerships to replace potential deposit outflows with stablecoin revenue.

· Retail: Major merchants see stablecoins as a tool to lower card fees and shorten settlement cycles. Early implementations will rely on licensed issuers and closed-loop redemption systems, promoting through settlement discounts rather than interest payments, and directly integrating with ERP and payment systems to enhance capital turnover efficiency.

· Card Networks: Visa and Mastercard incorporate stablecoins into new settlement channels while retaining authorization, anti-fraud, and dispute resolution infrastructure. This achieves weekend and near-real-time settlement without requiring merchant front-end alterations, driving the profit model toward tokenization, compliance, and dispute management services.

· FinTech: Payment processors and wallet platforms are launching stablecoin accounts, cross-border payments, and on-chain settlement products based on bank-grade KYC, sanction screening, and tax reporting. Competitive advantages will focus on concealing chain technology complexity, providing reliable fiat channels, and delivering operational control systems that meet enterprise procurement and audit requirements.

As the US regulatory framework is established, similar frameworks are emerging globally (such as the Hong Kong "Stablecoin Regulation"), and more stablecoin regulations are expected to be introduced.

▲ TBAC Presentation, Digital Money

Other Policy Trends

Retirement Plan Investment New Policy

The August 2025 Executive Order "Expanding 401(k) Investor Access to Alternative Assets" aims to expand the investment choices for employer-sponsored retirement plans, allowing retirement savers to allocate digital assets and other alternative assets through actively managed investment tools.

As part of its administrative function, the Department of Labor must reevaluate the Employee Retirement Income Security Act (ERISA) guidance within six months. Anticipated ERISA-compatible safeguard measures include: reaffirming the prudence standard of neutrality and case-by-case analysis, as well as providing a safe harbor-style verification checklist.

While the independent agency SEC is not directly bound by executive order, it can promote access through rulemaking: clarifying qualified custodian standards, enhancing cryptocurrency fund disclosure/marketing guidelines, and approving retirement plan-friendly investment tools.

Currently, the majority of 401(k) core menus have yet to incorporate cryptocurrency assets, primarily achieved through self-directed brokerage windows—participants can buy spot Bitcoin ETFs (some plans include Ethereum ETFs), with a few providers offering a limited "cryptocurrency window." In the short term, compliance pathways will be limited to regulated ERISA-compatible products: spot BTC/ETH ETFs and professionally managed funds with regulated cryptocurrency allocations. Due to 401(k) committees following ERISA's "prudent investor" principle, it is challenging to argue that single volatile tokens, self-custody, or staking/DeFi yield are suitable for ordinary savers. Most tokens and yield strategies lack standardized NAV calculation, stable liquidity, and a clear custody audit trail, and their legal status is unclear, potentially triggering SEC/DOL scrutiny and class action risks when included in plans.

Equal Opportunity for All Investors Act

The Act proposes to establish an SEC knowledge exam as a new pathway for "accredited investor" designation. The House passed a draft on July 21, 2025, with the Senate receiving it for deliberation on July 22.

Early-stage token presales in the U.S., cryptocurrency venture capital, and most private funding rounds rely on Regulation D, currently limited to accredited investors. The knowledge exam route will break through the wealth/income threshold, enabling investors with expertise but not necessarily wealth to participate legally in private cryptocurrency financing.

Opponents argue that expanding access to opaque, low-liquidity private markets may exacerbate investment risks. The fate of the Act in the Senate will depend on the rigor of the exam and the adequacy of safeguards. Even if passed, the SEC needs one year to design the exam + 180 days for FINRA approval, meaning it will not take effect immediately.

Bitcoin Act

Senator Cynthia Lummis introduced the "Bitcoin Act" (S.954) on March 11, 2025, aiming to establish a U.S. Strategic Bitcoin Reserve. The Act requires the Treasury Department to purchase 200,000 BTC annually (for 5 years, totaling 1 million BTC) and sets a 20-year lock-up period (prohibiting sale, exchange, or use as collateral during this time). After 20 years, BTC can only be gradually sold to reduce federal debt (10% of the held amount every two years). The Act also stipulates that forfeited BTC must be transferred to the strategic reserve upon conclusion of legal proceedings.

Funding is not relying on new taxes or national debt, but instead through: (1) the first $60 billion transferred annually from the Federal Reserve to the Treasury during the 2025-2029 fiscal years prioritized for coin purchases; (2) revaluing the Federal Reserve's gold certificate accounting value from $42.22 per troy ounce to market price (around $3000 per troy ounce), with the appreciated portion prioritized for investment in the Bitcoin plan.

▲ https://www.stlouisfed.org/

If fully implemented, the U.S. will accumulate the purchase of 1 million BTC (approximately 4.8% of the 21 million total supply cap). In comparison, the current largest Bitcoin-holding publicly traded company MicroStrategy holds 629,000 BTC (around 3%), surpassing any single ETF holding and significantly exceeding the total ETF holdings across the industry as per bitcointreasuries.net statistics (approximately 1.63 million BTC).

By elevating Bitcoin to the status of a strategic reserve asset, the U.S. will grant it unprecedented legitimacy. This official endorsement could change the stance of institutional investors who have been cautious due to regulatory uncertainty. If the U.S. takes the lead, it may prompt other countries to follow suit. All these effects will form strong Bitcoin price-driving factors: substantial demand created by five years of continuous purchases, coupled with a supply shock caused by a twenty-year lockup period, is likely to lead global capital to follow suit.

▲ bitcointreasuries.net

However, the "BITCOIN Act" has only been submitted to the Senate Banking Committee, not yet reviewed or voted on, lagging far behind the "CLARITY Act" passed by the House and the legislated "GENIUS Act." In practical terms, the bill involves core issues of Federal Reserve independence and budget politics: mandating the purchase of 1 million BTC and locking it up for 20 years, funded through Federal Reserve transfers and gold revaluation. The bill currently has mainly Republican support, but decisions at the asset-liability balance sheet level typically require a bipartisan consensus to pass through the Senate. More importantly, directing future Federal Reserve transfers towards Bitcoin purchases will reduce fiscal revenue that could have been used to reduce borrowing, potentially exacerbating budget deficit risks.

ETF

The most definitive signal of a policy shift came when the SEC, after years of delay, approved a physically-backed cryptocurrency ETF. In January 2024, the agency historically approved multiple Bitcoin ETPs and immediately launched trading, propelling Bitcoin to a new all-time high in March and attracting mainstream funds. By July 2024, a physically-backed Ethereum ETF was trading in the U.S., with major issuers launching funds directly holding ETH.

The SEC also showed openness to assets beyond Bitcoin and Ethereum: actively processing other crypto ETF applications and collaborating with exchanges to establish universal listing standards to streamline future approval processes. Positive developments also occurred in the staking space — the SEC recently clarified that "protocol staking activities" do not constitute a security issuance under federal securities laws.

U.S. Predictive Market Development

In early October 2024, the federal appeals court approved the predictive market platform Kalshi to go live before the elections, significantly boosting market participation. Subsequently, the CFTC continued to advance event contract rulemaking and held a roundtable in 2025, without setting a timetable but potentially issuing further guidance or final rules.

Polymarket, through its subsidiary QCX LLC (now renamed Polymarket US), obtained CFTC designation as a contract market and announced the acquisition of the QCEX exchange, stating it will "soon" open access to the U.S. If integration and approval progress smoothly, and the CFTC maintains an open attitude towards political contracts, Polymarket could potentially participate in the 2026 U.S. election prediction market. The platform is reportedly also exploring issuing a proprietary stablecoin to earn treasury yields on platform reserves, but current user rewards mainly come from market-making/liquidity incentives rather than real asset returns on idle funds.

Conclusion

U.S. policy is a key lever in shaping market structure and capital access, thereby decisively impacting Bitcoin's price. The SEC's approval of a physically-backed ETF on January 10, 2024, paved the way for mainstream capital inflows, driving Bitcoin to hit a new all-time high in March 2024; and the friendly policy environment following Trump's victory in November 2024 further propelled the price to reach historic peaks in July-August 2025. The future trajectory will depend on the normalization of rules and infrastructure.

· Baseline Scenario: Continued policy implementation. Regulatory agencies enact the "GENIUS Act," the Department of Labor establishes ERISA protections, and the SEC gradually approves ETFs/staking mechanisms. Expansion of access channels through brokerage windows and Registered Investment Advisors (RIA), banks, and card networks extending stablecoin settlement applications.

· Optimistic Scenario: The Senate advances the market structure bill, the first batch of "Mature Blockchain" certifications are issued without major objections, and the Labor Department provides a safe harbor framework. Banks massively issue permissioned stablecoins, and the ETF product lineup continues to expand. This will drive pension funds/RIAs to accelerate their allocations, enhance liquidity depth, and lead to a valuation reassessment of compliant, truly decentralized assets.

· Pessimistic Scenario: Legislative progress stalls — all pending bills remain in limbo. The SEC delays or denies ETF amendment applications related to staking. Banking regulatory agencies take a hard stance on the "GENIUS Act," delaying mass issuance; major record custodians restrict broker window access.

In either scenario, the following key metrics will serve as critical observation signals: the number and settlement volume of permitted stablecoin issuers, the approval status and SEC objections of the first batch of mature certifications, the net inflows into ETFs, and the percentage of 401(k) plans with broker window access, and the progress of banking/card network settlement pilots transitioning to full operation. These metrics will reveal whether the U.S. crypto market is truly evolving towards a regulated financial system or slipping back into contraction.

Appendix:

·https://www.stlouisfed.org/on-the-economy/2023/nov/fed-remittances-treasury-explaining-deferred-asset

·https://financialservices.house.gov/uploadedfiles/2025-05-29_-_sbs_-_clarity_act_of_2025_-_final.pdf

·https://a16zcrypto.com/posts/article/genius-act-clarity-act-crypto-legislation-explained/

·https://www.sec.gov/newsroom/speeches-statements/cf-crypto-asset-exchange-traded-products-070125

·https://www.willkie.com/-/media/files/publications/2025/07/recent-developments-for-crypto-asset-exchange-traded-products-and-exchange-traded-funds.pdf

·https://www.mayerbrown.com/en/insights/publications/2025/07/genius-act-signed-into-law-us-enacts-federal-stablecoin-legislation

·https://www.sec.gov/newsroom/press-releases/2024-79

·https://www.whitehouse.gov/presidential-actions/2025/08/democratizing-access-to-alternative-assets-for-401k-investors/

·https://www.federalreserve.gov/releases/h41/current/

·https://www.coindesk.com/business/2025/07/22/crypto-prediction-market-polymarket-weighs-launching-its-own-stablecoin-source

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