Focus on the CLARITY Act: A complete analysis of its content, significance and industry evaluation

Deng Tong, Golden Finance

Recently, the U.S. House of Representatives is considering the Digital Asset Market Clarity Act (CLARITY Act). The bill is based on the 21st Century Financial Innovation and Technology Act and is a market structure bill. U.S. Senator Elizabeth Warren warned that the bill could allow non-crypto companies to circumvent the supervision of the U.S. Securities and Exchange Commission (SEC) through asset tokenization. According to the House bill, listed companies like Meta or Tesla can completely get rid of SEC supervision by simply putting their own stocks on the blockchain.

What is the content of the CLARITY Act? What is the significance of the bill for the development of the crypto industry? How do industry insiders evaluate the bill?

I. A quick overview of the content of the CLARITY Act

On May 29, 2025, French Hill, Chairman of the House Financial Services Committee, proposed the Digital Asset Market Clarity Act, which aims to eliminate the long-standing ambiguity in digital asset regulation by clarifying the responsibilities of the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).

The bill, introduced by the House Financial Services and Agriculture Committees on June 23, defines digital commodities as digital assets whose value is “intrinsically linked” to the use of a blockchain.

“Mature” blockchains

The CLARITY Act requires that the value of digital commodities associated with mature blockchains “derives primarily from the use and operation of the blockchain,” that no user be restricted or privileged, and that specific holders be limited to holding less than 20% of the circulating units. Maturity (or expected maturity) would be a prerequisite for certain features of the bill’s framework.

The bill would allow issuers of digital commodities to demonstrate to the SEC that their associated blockchains are mature and would establish criteria for the SEC to assess blockchain maturity. The CLARITY Act defines a mature blockchain as one in which “the blockchain system and its associated digital commodities are not under common control of any one person or group of persons.” The bill contains specific time limits—a blockchain must be mature four years after the bill’s passage or after its first sale, whichever is later. The SEC will ensure maturity through semi-annual reporting and disclosures, including information on the amount of funds raised by the issuer, the timeline for the development of the blockchain system, and how maturity was achieved. It remains to be seen how the SEC will use this maturity information. Under the draft, digital commodity issuers or their related or associated persons may submit certain information to the SEC when they believe that a blockchain has reached maturity.

The SEC can reject an application within 60 days or request an extension due to insufficient information or novel/complex issues. If the SEC does not issue a rejection notice within 60 days, the blockchain will automatically be deemed mature.

The benefit to founders and developers is that the process, while lengthy, is time-bound, so issuers do not have to wait indefinitely for potential certification by the SEC. A similar back-and-forth process is expected for digital commodities seeking certification with the Commodity Futures Trading Commission (CFTC).

SEC Jurisdiction

The bill would provide an exemption from the registration requirements of the Securities Act of 1933 for investment contracts involving digital commodities on mature blockchains that meet certain conditions. Issuers relying on the exemption must limit sales of digital commodities to $75 million in a 12-month period. The bill would require issuers relying on the exemption to file an “offering statement.” Issuers of digital commodities associated with immature blockchains would face additional reporting requirements. The bill would direct the SEC to adopt rules within 270 days of enactment to impose additional requirements on immature blockchains and allow it to restrict such issuers from relying on the exemption to raise additional capital.

The bill would not restrict access to accredited investors based on income or net worth participation thresholds.

The bill implies that some digital commodities subject to the bill may also be investment contract assets, which are sold pursuant to an investment contract (a security). However, “investment contracts” do not include “investment contract assets.” This would appear to imply that an instrument must be issued through an investment contract to constitute an “investment contract asset,” but an “investment contract asset” itself is not an investment contract and therefore not a security.

The bill would allow traditional securities market participants registered with the U.S. Securities and Exchange Commission (SEC) to participate in secondary market trading after notifying the U.S. Commodity Futures Trading Commission (CFTC) (but without registering), provided that the two agencies' supervision is "consistent." The bill would allow alternative trading systems (ATS) registered with the U.S. Securities and Exchange Commission (SEC) to trade any digital commodity that meets the listing standards, under certain restrictions. The SEC would have jurisdiction and rulemaking authority over digital commodity trading by these market participants.

CFTC Jurisdiction

The bill would give the U.S. Commodity Futures Trading Commission (CFTC) exclusive regulatory jurisdiction over any digital commodity trading (including spot or cash markets) conducted by any entity registered or required to register with it. The bill would require digital commodity exchanges ( DCEs), such as the centralized platforms that currently dominate cryptocurrency trading, and digital commodity brokers and dealers to register with the CFTC. The bill would lay out core principles that exchanges must follow, including trade monitoring, recordkeeping and reporting, addressing antitrust, and minimizing conflicts of interest. The bill would prohibit DCEs from commingling their assets with customer assets, but customers could waive that right for certain reasons. The bill would prohibit DCEs and their affiliates from trading for their own accounts, but would allow the CFTC to make rules that would allow such trading for certain specified purposes. The bill would require updating bankruptcy laws to account for funds held by DCEs, but would remove those funds from the commingling ban.

Commodity exchanges (DCEs) would be allowed to offer digital commodities only if the relevant blockchain has been certified as mature, or (for blockchains that are not yet mature) whose issuers meet ongoing reporting requirements. Before listing a new digital commodity, the DCE must publish certain information, including source code, trading history, and the "economics of the digital commodity." The new certification would take effect 20 days after the application is submitted. The CFTC’s rejection will require a detailed analysis.

Provisional Registration and Other Provisions

The bill would establish a provisional registration regime to regulate digital currency exchanges (DCEs), brokers, and dealers prior to the bill’s implementation. Entities that apply for registration would be deemed eligible for the provisional registration regime subject to meeting certain conditions, including safeguarding customer assets and allowing the CFTC access to their books and records. A provision allowing the CFTC to charge fees to intermediaries that file applications under the provisional registration regime would expire after four years.

Decentralized finance activities such as validation would be excluded from the bill’s requirements but would not be excluded from the agency’s antifraud and antimanipulation powers.

The bill:

1) applies the Bank Secrecy Act to new digital currency exchanges, brokers, and dealers, subjecting them to anti-money laundering requirements;

2) amends the Bank Holding Company Act to permit financial holding companies and qualifying banks to engage in digital commodity activities;

3) limits the jurisdiction of the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) over payment stablecoins to transactions involving registered entities;

4) creates qualified digital asset custodian requirements (which could include banks), which could be subject to state or federal regulation by different regulators, depending on the type.

II. The significance of the CLARITY Act

1. From focusing on whether it is a security to whether it is decentralized enough

The CLARITY Act no longer focuses on whether a certain cryptocurrency is a security, but on maturity - "how decentralized is it?" This is crucial because the degree of decentralization will ultimately determine the jurisdiction of the SEC (for early centralized tokens, which are designated as "investment contract assets") or the CFTC (for more mature and fully decentralized blockchain network tokens, which are designated as "digital commodities").

2. Create a new framework for digital asset regulation

Clearly divide the SEC and CFTC to improve long-term regulatory ambiguity.

3. Promote the development of the DeFi ecosystem and attract traditional finance to enter the market

The bill explicitly recognizes and protects decentralized financial protocols. The bill covers autonomous custody rights and anti-fraud enforcement, while recognizing that truly decentralized protocols operate differently from traditional financial entities. This recognition is critical to the maturity of the DeFi ecosystem and its integration with the traditional financial system.

In addition, the bill provides a regulatory framework for traditional financial participants so that they can enter the cryptocurrency industry without worrying about compliance risks.

3. Urging from Stand With Crypto

On July 7, 2025, Coinbase's non-profit advocacy organization Stand With Crypto and 65 other crypto organizations jointly sent a letter to Congress urging them to quickly pass the CLARITY Act. Alliance members also include some giants in the field of non-fungible tokens (NFTs), such as OpenSea and Dapper Labs.

The original letter is as follows:

Dear members of the U.S. House of Representatives:

Thank you for your continued commitment to promoting American innovation and strengthening consumer protection. On behalf of 52 million Americans who own cryptocurrencies, I implore you to support the bipartisan CLARITY. We know there are attempts to politicize cryptocurrency legislation, but as cryptocurrency radically reshapes the global economy, the United States risks falling behind unless we adopt pro-crypto policies that fully embrace blockchain technology.

We are at a critical crossroads. Cryptocurrency is not only laying the foundation for a more inclusive, transparent, and secure digital economy, it is also opening the door to economic opportunity, innovation, and financial empowerment at an unprecedented scale.

America’s leadership in cryptocurrency is already showing signs of slipping. We cannot let inaction and uncertainty jeopardize our ability to secure America’s economic future. Above all, the U.S. cryptocurrency industry needs market structure — one that ensures clear rules and provides the regulatory clarity developers, users, and advocates need for continued innovation.

Cryptocurrency developers need clear guidance and safeguards to create blockchain systems where users can control their digital assets; consumers need consistent standards of transparency, security, and accountability to protect them from fraud, loss, and abuse; and the current lack of standardized rules hinders institutional adoption and innovation, forcing talent and businesses to turn to overseas jurisdictions that are more friendly to cryptocurrencies. The CLARITY Act addresses these issues through its regulatory framework, including clarifying the roles and responsibilities of the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). The CLARITY Act will not only empower developers to innovate, but will also protect consumers through choice, promote greater participation in the blockchain economy, and strengthen national security.

The 65 cryptocurrency organizations that signed represent more than 6,100 jobs in 21 states and support the efforts of the "Stand With Crypto" organization on behalf of American cryptocurrency owners to advocate for clear, common-sense regulation for the cryptocurrency industry. We implore you to support the CLARITY Act and unleash the potential of the cryptocurrency industry.

Fourth, what do industry insiders think of the bill?

Agree

• Former SEC Commissioner Elad Roisman: The bill is an important step in providing needed clarity to the digital market.

• Former CFTC Chairman Rostin Behnam: Agrees that there is a regulatory gap in current federal law and urges Congress to pass "targeted legislation" to fill this gap.

• Ji Kim, Chairman and Acting CEO of the Cryptocurrency Innovation Council:The CLARITY Act is an important step toward clear crypto rules that define the roles of the SEC and CFTC, protect self-custody, and safeguard consumer rights.

Opposition

• Former Commodity Futures Trading Commission Chairman Timothy Massad raised significant concerns, particularly regarding anti-money laundering provisions. “We have to give Treasury and other regulators adequate tools to address these risks. But I don’t think we’re there yet.” When asked directly whether the bill adequately addresses anti-money laundering concerns, Massad responded “not enough” and pointed out key gaps: The bill only applies Bank Secrecy Act requirements to centralized intermediaries; Crypto assets can be transferred without going through intermediaries, creating enforcement loopholes; Treasury needs to have more authority over decentralized protocols and foreign platforms; Stablecoin issuers should be required to monitor suspicious wallet activity.

• Maxine Waters, the top Democrat on the House Financial Services Committee, criticized the bill as hasty and irresponsible, warning that it would weaken regulation of high-risk digital asset activities and open the door to potential abuse. Waters also expressed concern about the growing entanglement between Donald Trump's financial interests and federal cryptocurrency policy. She called the bill "Trump's crypto scam" and pointed to the president's growing influence in the digital asset space, including trading platforms, stablecoins, mining companies, NFTs and other token investments, which are estimated to have brought in at least $620 million in revenue.

• U.S. Senator Elizabeth Warren warned: The bill could allow "non-crypto companies" to circumvent the supervision of the U.S. Securities and Exchange Commission (SEC) by tokenizing assets. According to the House bill, listed companies like Meta or Tesla can completely get rid of SEC supervision by simply putting their own stocks on the blockchain.

V. Conclusion

The CLARITY Act is another bill that has attracted the attention of the industry after the GENIUS Act. If the bill is finally passed, it will definitely benefit the long-term development prospects of the cryptocurrency industry and boost the crypto market in the short term. However, it is still necessary to pay attention to specific issues such as the power distribution and "maturity" determination of the U.S. SEC and CFTC in cryptocurrency supervision. If the two regulatory authorities work well together, it will promote the innovative development of the US cryptocurrency industry and attract more traditional financial giants to enter the cryptocurrency field. However, if there is regulatory friction between the two, the industry will continue to face regulatory chaos.

For the United States, this is a turning point in the development of the cryptocurrency industry; for the global cryptocurrency industry, this is an attempt full of opportunities and challenges. Whether it succeeds or fails, it will become a valuable asset for regulators.

For more information about the CLARITY Act, please click: "GENIUS Act Passed by the US Senate: What Impact Will It Have on the Crypto Industry?"