Interpreting the US CLARITY Act, a major step towards clarifying digital asset regulation

402 0 18

Original | Odaily Planet Daily ( @OdailyChina )

Author: Golem ( @web3_golem )

The U.S. Digital Asset Market Clarity Act, or CLARITY Act, was passed by the U.S. House Agriculture Committee and the Financial Services Committee by votes of 47 to 6 and 32 to 19 respectively, and will soon be submitted to the House of Representatives for a full vote.

The full name of the CLARITY Act is “Digital Asset Market Clarity Act of 2025”, which was submitted by Republican Congressman J. French Hill of Arkansas. It aims to establish a clear and unified regulatory framework for the US digital asset (crypto asset) market, and clarify the division of responsibilities between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) in the field of digital assets. While protecting investors and combating fraud, it also leaves exemptions and research space for innovation (DeFi, stablecoins, NFTs, etc.).

The bill was previously blocked from review due to controversy in the House of Representatives over the potential conflict of interest caused by Trumps involvement in crypto activities. However, on June 12, the latest amendment to the bill that prohibits President Trump and his family from profiting from trading or promoting crypto assets was rejected . Thompson, chairman of the House Financial Services Committee and the Agriculture Committee, said, This is not the place to discuss the presidents ethics, and review was allowed to continue.

In this article, Odaily Planet Daily will mainly outline the key contents of the CLARITY Act (with the help of ChatGPT) and analyze the subsequent impact on the crypto market.

Main contents of the CLARITY Act

The impact of security incidents on the crypto and financial markets, from the bankruptcy of Mt. Gox in 2013 to the collapse of FTX in 2022, as well as the frequent and long-lasting legal disputes between the SEC and crypto projects such as Ripple, have highlighted the ambiguity of the definition of securities and commodities. At the same time, both the SEC and the CFTC have partial regulatory authority over digital assets, but there are overlaps and conflicts between the two in terms of definition, enforcement standards, and even market access. Therefore, the birth of the CLARITY Act can clearly divide the responsibilities of the two regulatory agencies and avoid regulatory confusion.

The CLARITY Act is mainly divided into five parts, covering the entire process from definition, transactions to supervision and innovation support.

Title I: Definitions and Rulemaking

Chapter 1 mainly amends and adds clear definitions of core concepts such as blockchain, blockchain application/protocol/system, decentralized governance system, digital assets, digital commodities and related market participants (issuers, affiliates, related persons) in the Securities Act of 1933, the Exchange Act of 1934, and the Commodity Exchange Act; requires the SEC and CFTC to complete the formulation of supporting rules within the prescribed time limit and establish a temporary registration system for digital commodity exchanges, brokers, and traders.

The definition of digital commodity is the same as the meaning given to the term in Section 1a of the Commodity Exchange Act. The definition of digital commodity in Section 1a of the Commodity Exchange Act is as follows:

“A digital asset that is intrinsically associated with a blockchain system—that is, the digital asset is directly used in or derived from the functionality or operation of the blockchain system, or from the services provided by the system—and its value is derived or expected to be derived from the use of the blockchain system.”

At the same time, it clearly excludes payment stablecoins such as USDT, USDC, securitized tokens and other non-speculative assets such as artworks, game props, and virtual land from the category of digital goods.

Title II: Distribution and Sale of Digital Goods

Chapter 2 mainly identifies investment contract assets, establishes exemption conditions for primary issuance and secondary market transactions, and stipulates requirements for mature blockchain systems, and clarifies that these provisions will take effect 360 days after the signing and effectiveness of the bill.

The Act states that a digital commodity that meets the requirements of peer-to-peer independent transfer and is sold in accordance with an investment contract is considered an investment contract asset. In other words, any digital commodity sold in accordance with an investment contract in the sense of the Securities Law during capital raising is classified as an investment contract asset in that transaction; and when these assets are resold by non-issuers (or their agents/underwriters) in the secondary market, they no longer constitute an investment contract (i.e., they are no longer subject to the Securities Law), and only retain their digital commodity identity.

At the same time, the exemption conditions for primary issuance and secondary market transactions are also explained. The primary issuance of digital products is limited to issuers of digital products. In any consecutive 12 months, the maximum amount of funds raised can be US$75 million. Issuers must submit disclosure documents to the SEC before the sale and obtain an effective or confirmation letter before they can start sales.

The secondary market transaction exemption is mainly for digital products that were originally issued through investment contracts and transferred in the secondary market. As long as the secondary transfer does not involve the original issuer or any entity controlled by it, the act is no longer considered an offer or sale of the original investment contract and is not subject to securities trading supervision under the Securities Act of 1933.

Title III: Intermediary Registration under the SEC

Chapter 3 mainly includes licensed payment stablecoins and digital commodities in the scope of SEC anti-fraud enforcement ; at the same time, it sets targeted exemptions for DeFi activities and conducts research on topics such as bank custody, broker/dealer disclosure, and foreign counterparty participation.

On June 9, under a joint statement from 10 organizations including Paradigm, Uniswap Labs and Jump, the Blockchain Regulatory Certainty Act (BRCA) was included in the latest version of the CLARITY Act, specifically in the targeted exemption clauses for decentralized finance (DeFi) and blockchain developers.

Anyone who directly or indirectly engages in the following activities related to the operation of blockchain systems or DeFi trading protocols is not subject to Section 15H of the Securities Exchange Act and its derivative rules (but is still subject to anti-fraud/anti-manipulation provisions):

Network transaction processing: compiling, forwarding, retrieving, sorting, verifying network transactions or similar functions.
Node and computing services: providing computing power, running nodes/oracles, bandwidth or other similar ancillary services.
User Interface: Provides a front-end interface for users to query and access blockchain data.
Protocol and messaging system maintenance: Development, release, management, maintenance or distribution of blockchain systems, DeFi transaction protocols or DeFi messaging systems.
Liquidity Pool Participation: Running or participating in a liquidity pool to execute spot buying and selling of digital commodities.
Non-custodial wallets and key management: Creating or distributing wallet software or other tools that only help individuals to self- keep and protect digital assets or private keys.

Title IV: Intermediary Registration under the CFTC

Chapter 4 clarifies the CFTC’s exclusive regulatory authority over the digital commodity spot market ; requires futures traders to use qualified digital asset custodians; and establishes a transaction certification and registration mechanism for exchanges, brokers, and traders; sets rules for commodity pool operators (CPOs) and commodity trading advisors (CTAs); and includes a congressional position statement.

This bill will extend the registration obligations of CPOs/CTAs to the field of digital commodities, and clarify the rigid requirement that they cannot practice without registration. At the same time, it authorizes the CFTC to make rules for conditional exemptions for CPOs/CTAs to alleviate duplication, conflicting or overly onerous compliance requirements and promote innovation.

A congressional position statement is noted at the end of this chapter, indicating that neither this law nor any amendments to it grant any federal or state regulator the power to regulate commodities other than digital commodities in the spot market, thereby preventing regulators from using this law expansively to regulate spot transactions of traditional commodities such as oil and agricultural products.

Title V: Innovation and Technology Support

Chapter 5 demonstrates Congress’s positive stance on digital asset innovation. At the same time, within 180 days from the date of promulgation of this bill, a “FinTech and Innovation Strategic Center” will be established ; the CFTC Laboratory (LabCFTC) will be legalized to conduct special research on DeFi, NFT, blockchain payment systems, market infrastructure, financial literacy, etc.

This chapter establishes a CFTC laboratory within the Commission (LabCFTC), with a director appointed by the Commission and subject to the Commissions control. LabCFTC will submit a report on its activities to the House Committee on Agriculture and the Senate Committee on Agriculture, Nutrition, and Forestry by October 31 of each year, beginning in 2025.

Possible subsequent impact

Currently, the CLARITY Act has been submitted to the House of Representatives for a full vote. Based on the votes passed by the House Agriculture Committee and the House Financial Services Committee, the probability of the bill being passed in a full house vote is approximately 65%.

In summary, the passage of the CLARITY Act is beneficial to the entire crypto industry. First, by clarifying the division of jurisdiction between the SEC and the CFTC, it is conducive to changing the chaotic situation of crypto regulation. It also clarifies the regulatory boundaries of crypto activities, so that crypto practitioners have laws to follow when engaging in crypto business activities. Second, the bill also promotes the development of the crypto industry through policy measures, such as the establishment of a financial technology and innovation strategic center and a CFTC laboratory. This also means a shift in supervision from regulation to guidance, using its own advantages to actively guide the US crypto industry to develop in a more compliant direction.

But critics say the bill could boost venture capital or weaken securities laws governing cryptocurrencies.

Supporters and critics have different opinions. We will have to wait and see whether the CLARITY Act can eventually be passed and whether it can bring substantial benefits to the crypto industry.

This article is sourced from the internet: Interpreting the US CLARITY Act, a major step towards clarifying digital asset regulation