The biggest crypto story of the week? The Digital Market Structure Bill, of course!

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It’s been a wild week in crypto, with the biggest stories centering around the House Republicans’ Digital Market Structure Bill. Of course.

Sure, the SEC’s flurry of furious attacks on Binance and Coinbase may have stolen most of the headlines, but these are just lawsuits, not real law.

Genuine legal progress through which a proper regulatory structure is built, within which digital asset markets can operate safely and successfully, is being quietly developed by lawmakers. In the meantime, the SEC is bustling about, trying to drive regulatory square pegs into legal round holes.

On the Bell Curve Podcast (Spotify/Apple), co-host Jason Yanowitz says the ongoing attack on centralized crypto finance giants has him thinking about current roles in the crypto industry and how which they don’t quite align with traditional finance.

Essentially, he says, three groups exist in the crypto market that parallel the traditional market structure in some ways, but are confusingly mixed or overlapping in purpose and functionality.

In traditional markets, he explains, you have the stock exchange, which brings buyers and sellers together.

Then you have the brokers who represent the client and bring the client’s trades to the exchange. And then you have the clearing house, which settles the transactions and is sometimes also the custodian.

In the world of centralized crypto finance, there is no such thing as a broker per se, Yanowitz says, because the user owns assets held directly on platforms like Coinbase, for example. Then the settlement is sometimes done with Coinbase, but sometimes just on the L1, like on ETH.

Healthy guard rotation

Vance Spencer, co-founder of Framework Ventures, said a group of startups that have recently been funded will benefit from future legal changes in the structure of the crypto market.

There’s a lot of really cool stuff being shipped right now, Spencer says, that will replace the Jane Streets and Jumps of the world as they retire.

It feels like there’s this healthy rotation of custody, but also that new technologies are stepping in to fill in the gaps in the market structure.

Spencer suggests that as market structure legislation changes to accommodate the unique characteristics of crypto, it makes some very exciting new companies and even crypto ETFs possible.

Framework Ventures co-founder Michael Anderson adds that in the eyes of what happened in the legislative realm, the biggest thing that happened this week was the market structure proposal.

Bill’s TLDR, Anderson says, is that it provides a black-and-white playbook for stablecoin operations, token project registration, and the legal steps for a token to go from title to title. to a sufficiently decentralized product.

This market structure will fundamentally change the way DeFi interacts, Anderson says. If you are an insider, such as a founder or investor in a protocol, versus a user, he says, you will have a different designation of tokens for the first 12 months.

You will not be able to sell them if you are an insider. You will need to disclose all assets. It will eventually transition to something decentralized enough.

Market structure is going to get much more complicated as regulation starts to come to the fore, he says.

Anderson expects things to be very similar to end users. But the places where things are traded will fundamentally change.

There is a lot of movement in a very positive direction.

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