In recent weeks, there has been significant attention on the CLARITY Act, a new legal framework proposed for cryptocurrency regulation in the US. The first review of this bill is scheduled for tomorrow morning.
But what is the significance of this new cryptocurrency bill, and which industry players are supporting it?
New Act Brings Clarity to Cryptocurrency Regulations
Since the GENIUS Act passed an important vote, the US cryptocurrency policy has become a particularly important topic. At the end of May, GOP Senator French Hill proposed the Digital Asset Market Clarity Act (CLARITY), a new legal framework for Web3 regulation.
The first review of the bill will take place tomorrow morning at 10 AM EST.
The proposed bill assigns CFTC as the primary regulator for digital commodities (on-chain tokens), including exchanges, brokers, and spot markets. It maintains the SEC's jurisdiction over investment contract assets—securities under the Securities Act.
Overall, it creates precise definitions and compliance pathways to minimize inconsistent enforcement.
In addition to consumer protections, it attempts to provide detailed rules to determine whether a token is a security or commodity, a challenging issue for regulators.
Without going into excessive detail, the bill aims to eliminate ambiguity in such situations.
Although proposed by a Republican, the CLARITY Act has received strong bipartisan support, reflecting a desire to create a robust legal framework for cryptocurrency regulation.
However, the initial language specifically focuses on assets, their classification, and the companies that custody them. The bill also exempts "DeFi activities" (such as developers, transaction relayers) from standard registration.
It also clearly protects peer-to-peer transactions and individual asset self-custody.
New and Upcoming Amendments
To address some shortcomings, the Blockchain Regulation Certification Act (BRCA) was recently introduced as an amendment to the bill. Currently, cryptocurrency industry political lobbying groups are trying to support it.
In addition to initial support, eight top trade associations issued additional statements earlier today:
Specifically, this amendment will ensure that the CLARITY Act does not impose unnecessarily heavy regulations.
However, some regulators may not agree with this general spirit. After all, what is such a law for? Former CFTC Chair Tim Massad, who recently warned about cryptocurrency corruption, has also testified about some potential pitfalls in the CLARITY Act:
"The CLARITY Act seems to start with technology and ask, how can we make investing in this technology easier? But the power of our securities and derivative laws lies in how we have traditionally focused on regulatory objectives, and provide...flexibility to achieve those objectives," Massad stated.
Similar criticisms have been raised for many recent cryptocurrency regulations, and the CLARITY Act may face similar challenges.
It is unclear how much this will affect the final bill, but the GENIUS Act has undergone significant amendments from its first version. Between tomorrow's review and the voting process, this bill could change significantly in the coming weeks.
