The House of Representatives passed the CLARITY Act, is the watershed of a new era of crypto-regulation coming?

Author: Fairy, ChainCatcher

Edited by: TB, ChainCatcher

On the board where digital assets are regulated in the United States, in addition to the stablecoin specialty law "GENIUS Act", another heavyweight chess piece is accelerating its fall. The CLARITY Act, the legislation known as the "turning point in crypto regulation" may completely rewrite the fate of the US crypto industry.

Over the past few years, U.S. crypto project parties, developers and platforms have been exploring and moving forward in a vague regulatory environment. The unknown responsibilities of the SEC and CFTC have led to many projects being in the dilemma of "testing and fouling". Once it is considered "unregistered securities issuance", it will be fined at the least, and at the worst, it will encounter a life-and-death crisis.

The emergence of the CLARITY Act not only tries to clarify the regulatory boundaries between the SEC and the CFTC, but also strives to establish a predictable and compliant development path for the digital asset industry.

Today, the bill has been passed unanimously by the House of Representatives Financial Services Committee and the Agriculture Committee, and the next step will be submitted to the House for vote. This is not only the starting point for the reshaping of the US crypto regulatory structure, but it may also become an important critical point for institutions to accelerate entry and truly take off in innovation.

The progress of the CLARITY Act

On May 29, French Hill, chairman of the U.S. House Financial Services Committee, formally introduced the CLARITY Act, which is 236 pages long. However, the advancement process is not smooth.

On June 3, the US SEC was strongly criticized by Democratic House staff when providing technical briefings on the CLARITY Act, and was called the "worst technical assistance briefing." Staff accused the SEC representative of being unable to answer simple questions, and even evaded key information on the grounds of "confidentiality", questioning its intention to cover up the truth and hinder legislation.

Meanwhile, some Democrats have expressed concerns about Trump's involvement in the crypto industry, questioning that he may have potential conflicts of interest that may interfere with the legislation of the bill.

Despite the controversy, the CLARITY bill is still being improved under the promotion of multiple parties. On June 9, under the joint statement of eight major crypto policy organizations, the Blockchain Regulatory Certification Act was successfully incorporated into the CLARITY Act. This amendment is seen as a "firewall" for DeFi developers, aiming to protect software developers and infrastructure providers who do not host customer assets.

To further clarify the boundaries of regulatory responsibilities, the Financial Services Commission and the Agricultural Commission respectively revised the bill and introduced their respective adjusted versions. Today, both committees successfully passed the bill. According to Republican lawmakers, the two versions will eventually be merged into a comprehensive bill and will be submitted to the House of Representatives for a full vote.

Interpretation of the bill: laying a clear blueprint for digital asset

supervision

The CLARITY Act did not start from scratch, but was continuously improved on the basis of relevant legislation in the past few years, especially the continuation and expansion of the 21st Century Financial Innovation and Technology Act (FIT21).

Here is an interpretation of the core points of the bill:

Division of regulatory authority: clarify the responsibilities of the SEC and CFTC

The core of the CLARITY Act is to clearly define the regulatory scope of SEC and CFTC based on the nature of digital assets. The SEC regulates "digital asset securities", while the CFTC regulates "digital goods". For "mixed" assets that may have both securities and commodity characteristics, the bill requires the two institutions to coordinate. The goal is to confirm that CFTC is the main regulator of the spot market of digital goods, while retaining the SEC's regulatory authority over securities-type digital assets.

According to the interpretation of community member @realMaxAvery, the bill sets up a path: projects can be used as securities in the early stage (high concentration and strong investment attributes). When their decentralization reaches a certain level, they can "graduate" and convert them into commodities for supervision.

One of the highlights of this is the concept of a "maturity blockchain system". If a blockchain network is sufficiently decentralized (no single controller, open source code, automatic operation), it can be certified as a "maturity system". Once this certification is obtained, its tokens will face looser regulation as they are more like commodities than securities.

DeFi and Blockchain Participants: New exemptions and boundaries

As long as you do not engage in intermediary services, developers and operators of decentralized blockchain networks do not need to register with the SEC or CFTC. The bill also recognizes that DeFi is different from traditional finance and protects developers from inappropriate financial regulatory constraints. Writing code, running nodes, or providing front-end interfaces is not usually considered a financial service provider, which allows developers to build Web3 infrastructure with peace of mind.

But the bill still retains anti-fraud and anti-manipulation powers, ensuring a balance between innovation and user protection.

Exchange and intermediary agency registration: Establish a regulatory system

Platforms operating digital commodity trading markets must register with the CFTC as "digital commodity exchanges", including OTC brokers and market makers. These institutions will comply with strict federal regulatory requirements such as minimum capital, risk management, transaction records, regulatory reporting, customer asset protection, etc.

If a company is involved in securities and digital commodity businesses at the same time, it needs to register with the SEC and CFTC respectively. Although the compliance burden is heavy, the bill clearly defines the regulatory boundaries between the two parties.

Encourage traditional financial institutions to enter the crypto market

The CLARITY Act opens the door for traditional financial institutions to enter the crypto field. Banks can legally provide crypto custody services, and traditional exchanges can also operate alternative trading systems covering both stocks and crypto assets, promoting institutional-level adoption and helping Wall Street embrace digital assets.

"Clearness" is a dual proposition of reconstruction and breakthrough

Whether it is clarifying the boundaries of responsibilities between SEC and CFTC, or providing protection for DeFi developers and blockchain innovators, the CLARITY Act has laid a predictable cornerstone of development for the industry. But in addition to the support voice, many concerns have emerged.

Some crypto-native companies point out that the bill may be more beneficial to traditional financial institutions at the enforcement level. For example, large Wall Street companies like Schwab, which have been registered with the SEC, can quickly start digital commodity-related businesses once the bill is implemented; while a large number of crypto-native companies may have to face the unclear and even more cumbersome registration procedures of the Commodity Futures Trading Commission (CFTC). This kind of institutional design may invisibly create an ambiguous "regulatory threshold".

Despite this, the gradual clarity of the regulatory system is still an indispensable part of promoting the maturity of the industry. The real "clarity" may mean new challenges, but it also indicates greater room for innovation.