The Digital Asset Market Clarity Act: A New Era for Cryptocurrencies in the US
Recently, the Digital Asset Market Clarity Act was formally introduced to the US House of Representatives, aiming to provide a clear and coordinated regulatory framework for the cryptocurrency sector. This proposal, coming a year after the approval of the Financial Innovation and Technology for the 21st Century Act, delineates the responsibilities between financial market regulatory authorities and aims to transform the US into a global leader in digital assets. This has been a stated goal of President Donald Trump since his reelection campaign.
The bill is strongly supported by Republicans through the Finance and Agriculture committees. The project seeks to ensure transparency and stability in the market, as well as promote wider adoption of digital assets as a whole. The real challenge for Congress lies in the timing and procedural obstacles: the bill on stablecoins, the Genius Act, is still under discussion in the Senate, but if adopted, it could increase market capitalization to up to $2.5 trillion.
In this article:
- What the Digital Asset Market Clarity Act entails
- Cryptocurrencies as commodities and empowering the CFTC
- Implications for crypto platforms and custodial services
The vision of the Digital Asset Market Clarity Act
The Clarity Act is a legislative initiative aimed at introducing cryptocurrency regulation to establish a clear regulatory framework for the industry. The Congress seeks to organically regulate a market worth over $3 trillion, starting with a clear division of responsibilities between the two main regulatory authorities: the SEC and the CFTC. The project assigns defined roles to the agencies, imposes stricter requirements on operators, and aims to ensure overall solidity to the ecosystem. It is still unclear whether the bill will be merged with the Genius Act on stablecoins and the Crypto Market Structure Bill, which will replace the Fit21.
The proposal is still far from passing the first procedural vote, but President Trump has stated that he will make a concrete decision on the future of the initiative by the Congress’s August summer break. Meanwhile, the two relevant House committees are preparing to hold a series of public hearings on crypto-assets, opening up discussions with industry experts and stakeholders. But what are the detailed contents of the Clarity Act? The American legislative action on cryptocurrencies focuses particularly on the role of the CFTC and the regulations affecting platforms, intermediaries, and custodial service companies.
Cryptocurrencies as commodities and CFTC empowerment
In the United States, cryptocurrencies have long been considered on par with commodities. The first ruling on this matter dates back to 2018 in a Massachusetts court. Commodities have traditionally been regulated by the CFTC (Commodity Futures Trading Commission), while securities (negotiable regulated securities like stocks and bonds) have been entrusted to the SEC. Cryptos represent a slippery terrain because, by nature, they exhibit characteristics of both commodities and securities. The Clarity Act now confirms that digital assets should fall under the jurisdiction of the CFTC, as previously proposed in the Digital Commodities Consumer Protection Act and the Responsible Financial Innovation Act.
The new bill gives the CFTC, as an agency promoting the integrity of commodity futures and derivatives markets, the leading role in the blockchain sector and digital commodities. The government plans for the CFTC to have exclusive jurisdiction over spot or cash markets for digital commodities. The SEC will maintain supervision over restricted digital assets, those representing securities. Following the decision in the case of SEC vs. Ripple, secondary digital asset transactions will not automatically be considered securities offerings, even if the initial sale was classified as such.
Crypto platforms will need to register with the CFTC or the SEC depending on the type of asset being traded: financial securities or digital commodities (such as Bitcoin and Ether) and derivatives. In the case of commodities, those wishing to register as an exchange, broker, or intermediary will need to obtain temporary registration while the CFTC finalizes the rules. Additionally, intermediaries will be required to separate customer funds from their own, disclose any conflicts of interest, and comply with anti-money laundering laws. Moreover, a Joint Advisory Committee consisting of industry experts will be established by the CFTC and SEC to provide guidance on regulations and policies.
Implications for crypto platforms and custodial services
Platforms will need to be regulated as financial institutions under the Bank Secrecy Act, which demands that institutions maintain records and report transactions to combat money laundering. The bill excludes wallet providers and some decentralized finance operations from SEC supervision. For crypto custodial operations, regulators cannot compel entities offering these services to hold clients’ digital assets on their balance sheets.
The CFTC will set the standards for being classified as a qualified custodian of digital assets. Players must be regulated entities subject to “appropriate supervision and regulation” from federal, state, or foreign authorities. Regarding stablecoins used for payments, which are considered non-financial securities in the proposal, the regulating entity already covering a specific area of a issuing company’s responsibility will continue overseeing to prevent overlaps and conflicts between various federal and state agencies. The SEC will retain fraud and anti-manipulation authority over transactions.
The Clarity Act also distinguishes the decentralized finance ecosystem for separate regulation, while providing an exemption for certain DeFi activities such as liquidity pool participation and management of user interfaces for decentralized protocols. CFTC, SEC, and the Treasury Department are tasked with conducting a comprehensive study on this evolving financial system and presenting a detailed report within a year. Meanwhile, the Government Accountability Office, the congressional investigative branch responsible for auditing and evaluation activities, is requested to conduct an exhaustive analysis on DeFi, NFTs, and blockchain technologies.
