Today, the House Committees of Financial Services and Agriculture passed the bipartisan CLARITY Act (H.R. 3633), setting it for a full floor vote next. The financial committee advanced the measure with a 32-19 vote, agriculture committee passed it with a 47-6 vote.
Key highlights of the CLARITY Act
- It aims to resolve the longstanding jurisdiction conflict among the crypto regulatory agencies of the US by redefining the responsibilities of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).
- It establishes that certain crypto assets will be regulated as commodities under the CFTC, while others will remain securities and operate under the SEC.
- The CLARITY Act also offers limited liability protection for blockchain developers, excluding them from money transmitter regulations.
- It also established the disclosure, fund segregation, and conflict of interest rules to protect the investors from crypto fraud.
Despite broad support CLARITY ACT faces criticism
Representative Maxine Waters voiced concerns while warning that certain provisions in the bill can lead to a conflict of interest. Her comment indicated the ties between political leaders and the crypto industry.
Brad Sherman stated that the bill could lead to industry bailouts and regulatory arbitrage. Former CFTC Chairman Timothy Massad called the CLARITY Act ‘complex’ while stating that the bill has expanded confusion rather than resolving the issues of crypto regulatory ambiguity.
CFTC will lead crypto regulations
- After becoming the primary crypto regulator, CFTC will oversee digital commodities, covering most cryptocurrencies and tokens traded on cash markets, including DeFi activities.
- It will mandate the activities of exchanges, brokers, and spot markets for non-security digital assets like Binance and Ethereum.
- It will also mandate stablecoin trade and custody on a commodity exchange, while the SEC’s role is limited to enforcing anti-fraud rules in stablecoin.
What’s next? Debate and vote on the CLARITY Act
After seeking approval from both committees, the CLARITY Act will proceed to the full House for votes and arguments. And if it is ultimately enacted, then it will become the first comprehensive law in the US for a crypto and digital assets regulatory framework. While the US Senate remains uncertain, the upper chamber works on enhancing digital asset law.
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FAQs
The CLARITY Act will clarify roles by defining “digital commodities” (under CFTC oversight, including most cryptocurrencies and DeFi spot markets) and “investment contract assets” (under SEC, focusing on how assets are sold).
Critics worry about potential conflicts of interest, regulatory arbitrage (creating minimal utility blockchains for CFTC oversight), reduced financial safeguards, and the bill’s complexity hindering effective regulation.
The CFTC will become the primary regulator for digital commodities, overseeing exchanges and brokers. The SEC will retain authority over investment contract offerings and enforce anti-fraud rules, particularly for stablecoins.
