Why Is Crypto Plummeting? All You Need to Understand About the New Congressional Crypto market Legislation

What’s causing the crypto downturn? One factor is that the regulatory conflict regarding crypto seems to be approaching a resolution, and the news isn’t entirely favorable.

A fresh piece of legislation—known as the CLARITY Act—has been introduced in Congress, suggesting transferring regulation of digital assets from the SEC to the CFTC.

If enacted, this law could reshape the governance structure of crypto in the U.S. and finally provide developers, exchanges, and investors with the concrete guidelines they’ve been demanding. However, many seem skeptical about a Congress with an all-time low approval rating.

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What’s Behind the Crypto Collapse? A Significant Shift in Crypto Regulation

Congress? The very same Congress that has been inactive for years. Whose approval rating is alarmingly low. That Congress? Well, yes!

The CLARITY Act dispels years of bureaucratic confusion with one straightforward idea: classify most digital assets as commodities rather than securities. This implies a contraction of the SEC’s jurisdiction and placing the Commodity Futures Trading Commission at the forefront.

Rep. Bryan Steil, chair of the House Financial Services Subcommittee, indicates that this is a strategy to maintain American leadership in the global crypto arena.

“Our bill guarantees U.S. supremacy, makes digital assets accessible, fosters innovation, and shields consumers from scams,” asserted Steil.

ICYMI: The CLARITY Act has been unveiled to finally create explicit regulations for crypto@RepFrenchHill of Arkansas is spearheading what may be the most crucial crypto legislation we’ve seen in the nation. A bipartisan group of co-sponsors has joined him… pic.twitter.com/07yXUAZW1J

— Max Avery (@realMaxAvery) May 29, 2025

This redefinition would provide clear legitimacy to major digital currencies such as BTC, Ethereum, SOL, and DOGE, which have historically navigated murky legal waters.

The bill has bipartisan political backing, with Democrats Angie Craig, Ritchie Torres, and Don Davis in base level. Such a coalition within a divided Congress doesn’t emerge unless the stakes are significant.

“This is about ensuring the U.S. remains competitive,” remarked Rep. Dusty Johnson. “Without clarity, we risk losing our edge.”

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Game-Changing Provisions

The legislation categorizes most crypto assets as “digital commodities,” including governance tokens like WLFI, released by World Liberty Financial. It also introduces a new classification—“mature distributed ledger systems”—for networks that are open-source, decentralized, and limit individual ownership.

Exchanges will have the option to register with the CFTC if they engage in trading digital commodities, or remain under SEC oversight if dealing with securities. The CFTC would also obtain exclusive jurisdiction over spot markets as per the bill.

What’s Behind the Crypto Downturn? Implications for the Crypto Sector

By transitioning authority from the SEC to the more lenient CFTC, the CLARITY Act has the potential to simplify entry into crypto—reducing bureaucracy, fostering innovation.

Initiatives like Ethereum and Solana might gain momentum as developers and investors finally receive the regulatory flexibility they’ve sought. DeFi platforms and wallets would also enjoy safety from SEC monitoring, a significant advantage for the open-source community.

However, don’t expect a hassle-free process. This is Congress we’re discussing, and Trump is advocating for an ambitious August timeline for crypto crypto law.

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The article Why Is Crypto Collapsing? Everything You Should Know About the New Congressional Crypto market Bill first appeared on 99Bitcoins.