Five takeaways from the release of a much-awaited crypto market structure

The Senate Agriculture Committee has released a draft of its portion of a much-awaited digital assets market structure bill — a critical step toward accelerating institutional and retail adoption of cryptocurrencies. 

Unveiled on Monday by Agriculture Chair John Boozman, R-Ark., and Sen. Cory Booker, D-N.J., the bipartisan discussion draft lays the groundwork for creating guardrails for the crypto industry in the U.S. It also establishes guidelines for institutions that want to work with digital assets, from bitcoin and ether to tokenized financial instruments.

“This is the most consequential roadmap for how an institution is going to integrate digital assets into their business,” Cody Carbone, CEO of crypto trade association Digital Chamber, told CNBC. “It’s like the best possible step-by-step of what type of compliance rules requirements they would need to follow to work with crypto.”

Here are five key takeaways from the discussion draft.

The text classifies some of the largest digital assets by market capitalization such as bitcoin and ether as “digital commodities,” placing them under the Commodity Futures Trading Commission’s purview.  

This provision removes a major blocker to digital asset adoption for institutional fiduciaries, Juan Leon, an analyst at crypto-focused asset manager Bitwise, told CNBC.

“Compliance and risk departments will finally have a federal statute to point to,” Leon said. “This shifts the internal conversation … [and] it provides the legal certainty required to move assets into a formal, strategic allocation.”

It will also create “a starkly bifurcated market” consisting of regulated and unregulated tokens, with the former class of assets seeing “a massive influx of institutional capital, deep liquidity and a robust derivatives ecosystem.”

The draft calls for crypto companies to “establish governance, personnel, and financial resource separation among affiliated entities that perform distinct regulated functions.”

Bitwise’s Leon interprets the provision as a challenge to the “all-in-one” business model that is common among crypto exchanges. According to those models, an exchange, broker, custodian, and proprietary trading desk are all wrapped up into one entity. 

In other words, digital asset firms could be required to keep their various businesses separated like traditional financial companies, according to Leon. The change would serve as “a foundational pillar for institutional adoption.”

The text gives more power to the CFTC, empowering it to work in tandem with the Securities and Exchange Commission to issue joint rulemaking on crypto-related…