tl;dr
The CLARITY Act, aiming to establish a U.S. framework for issuing and trading most cryptocurrencies, passed the House Agriculture Committee with a bipartisan 47-6 vote but faces significant challenges in the House Financial Services Committee. The bill proposes shifting most crypto regulation from t...
The CLARITY Act has passed the House Agriculture Committee with a bipartisan vote of 47-6, marking a significant yet challenging step forward in establishing a U.S. framework for issuing and trading most cryptocurrencies. The bill proposes transferring much of the crypto regulation authority from the SEC to the CFTC, while allowing token issuers the option to register with the SEC for added benefits such as direct sales to institutional investors.
Despite this progress, the CLARITY Act faces substantial hurdles in the House Financial Services Committee, where Democratic opposition is more pronounced. Democrats have voiced concerns over potential deregulation consequences, the bill enabling conflicts of interest particularly regarding President Trump’s crypto ventures, and the exemption of decentralized finance (DeFi) protocols from regulatory oversight. Numerous Democratic amendments addressing these issues were introduced but mostly rejected by the Republican majority.
The legislative process requires the bill to be approved by both the Agriculture and Financial Services Committees before it can reach the House floor. Each committee has marked up sections pertinent to their jurisdiction—commodities under the Agriculture Committee and securities under the Financial Services Committee. These sections will be combined into a comprehensive bill if both pass their respective markups.
Supporters hail the Agriculture Committee’s bipartisan vote as a sign of optimism for bipartisan progress, but the Financial Services Committee has proven to be a tougher battleground. The differences stem from divergent views on the roles of the CFTC and SEC in crypto regulation and political considerations regarding other established financial industries. Democrats in Financial Services have emphasized the possibility of the bill creating a “super-highway to corruption” and cited risks of another crypto collapse akin to FTX.
One critical point of contention is the bill’s treatment of DeFi platforms, which allow trading, borrowing, and lending of blockchain-based assets without traditional intermediaries. Critics argue that labeling these protocols as exempt from regulation could pave the way for regulatory evasion.
The markup session saw heated debate and multiple Democratic amendments, including attempts to restrict crypto activities by the president and prevent taxpayer-funded bailouts of token issuers. Both proposals were voted down. The markup is expected to continue with tense deliberations, as Republicans urge Democrats not to derail the bill, emphasizing the broader need for clear crypto market structure legislation.
Financial Services Committee leaders have defended the CLARITY Act against attacks focusing on personal ethics issues, clarifying that the bill’s purpose is to regulate the crypto market rather than individual conduct. The ongoing debate underscores the complexity and high stakes of shaping crypto policy at the federal level, with the future of U.S. crypto regulation hanging in the balance.