This change comes as part of the Responsible Financial Innovation Act of 2025, which aims to create clear rules for how digital assets are regulated in America. The bill addresses a key concern for companies working on blockchain-based financial products.
Senator Cynthia Lummis (R-Wyoming), who leads the legislation, told CNBC that lawmakers want to get the bill “on the president’s desk before the end of the year.” This timeline shows how urgent Congress considers crypto regulation.
Tokenized stocks are digital versions of traditional company shares that exist on blockchain networks. When a stock gets tokenized, it becomes a digital token that represents ownership in the same company. These tokens can be traded faster and sometimes in smaller pieces than regular stocks.
The key question has been whether these digital versions should follow securities laws (like regular stocks) or commodity rules (like gold or oil). The Senate’s new language makes it clear: tokenized stocks stay under securities law.
This decision keeps tokenized stocks compatible with existing broker systems, clearing houses, and trading platforms. Companies won’t need to build entirely new infrastructure to handle these digital assets.
The crypto industry has been actively lobbying for this legislation. In August 2025, a coalition of 112 crypto companies sent a letter to Senate committees asking for clear protections for software developers and non-custodial service providers.
Major companies like Coinbase, Kraken, Ripple, and venture capital firm a16z signed the letter. They warned that unclear regulations were driving talent overseas, with the U.S. share of blockchain developers falling from 25% in 2021 to 18% in 2025.
The letter argued that outdated financial rules might wrongly classify these developers as financial intermediaries, even though they just write software code. This classification could force them to follow banking regulations that don’t make sense for software development.
The legislation offers several advantages for traditional financial institutions looking to enter the tokenization space. Banks and financial holding companies would be explicitly allowed to engage in digital asset activities including custody, trading, lending, and payment services.
The bill also creates a “Micro-Innovation Sandbox” that lets eligible firms test new products for up to two years under limited regulatory exemptions. This gives companies room to experiment without immediately facing full compliance requirements.
Financial institutions have shown growing interest in tokenization because it can reduce costs, increase efficiency, and lower settlement risks. Major banks like Goldman Sachs, HSBC, and JPMorgan have already started pilot projects with tokenized assets.
Asset management firms have also embraced the technology. BlackRock and Franklin Templeton have launched tokenized mutual funds, while Bitcoin and Ethereum exchange-traded funds have attracted billions in investor money.
The Senate Banking Committee plans to vote on SEC-related provisions this month, while the Agriculture Committee will handle CFTC oversight matters in October. If both committees approve their sections, a full Senate vote could happen as early as November 2025.
However, the bill still lacks Democratic support. Even if all Republican senators back the measure, at least seven Democrats would need to join them for passage. Senator Lummis indicated that bipartisan negotiations are ongoing, with lawmakers pairing up on specific issues to build consensus.
The House of Representatives already passed its own version of crypto market structure legislation in July 2025. The two chambers will eventually need to reconcile their different approaches before sending final legislation to President Trump.
The current version of the Senate bill includes significantly stronger consumer protections compared to earlier drafts. The legislation now prohibits rehypothecation, which prevents exchanges from using customer assets for their own trading or lending activities.
This provision directly addresses problems seen in the FTX collapse, where the exchange improperly lent customer funds to its trading arm. The bill also requires proof of reserves, advertising standards, and limits on lending practices.
A new self-regulatory organization would bridge the SEC and CFTC while focusing on consumer protection. This organization would supervise crypto businesses and ensure they follow proper risk management and information-sharing practices.
The Senate’s clarification on tokenized stocks removes a major source of regulatory uncertainty that has held back innovation in American crypto markets. By keeping these assets under securities law, the legislation maintains investor protections while enabling new technology.
Success of this bill could determine whether America leads or follows in setting global standards for digital asset regulation. For an industry that has operated largely without clear rules since Bitcoin’s creation, comprehensive federal legislation would mark a turning point toward mainstream financial integration.
Also read: Crypto Phishing Scams Surge, $12M Lost in August
