The Ins and Outs of the CLARITY ACT

What is the CLARITY Act?

The Digital Asset Market Clarity (CLARITY) Act was first introduced on May 29, 2025, by Arkansas Congressman French Hill and was designed to create a clear foundation for digital assets. These regulations closely follow the GENIUS Act, which was signed back in July of 2025 to regulate stablecoins and to create a sturdy foundation for the market. Since digital currency is still “new”, the SEC and CFTC have been conflicting with each other over definitions and rule sets, but this act aims to resolve some problems and miscommunications by dividing crypto assets into three categories: digital commodities, investment contract assets, and permitted payment stablecoins. The legislation of the act is still a work in progress, but many reports are surfacing regarding whether or not this act will be approved.

What important guidelines should you look at?

The CLARITY Act is going to do exactly what it is named to do: help clarify rules and definitions to create a more secure market through the split between the SEC and CFTC. Under this split, the SEC is going to retain jurisdiction over investment contracts and primary market transactions, while the CFTC would be granted jurisdiction over digital commodity cash or spot markets.

Both agencies will also have to agree on definitions so there is not so much confusion in the market. A key term that would be defined if passed is a “digital commodity”, which refers to an asset that is linked to a blockchain system and gets its value from the operation of that blockchain. To facilitate this, a concept called the “mature blockchain system” is going to be introduced. This is a system that is not controlled by a person, but whenever your commodity reaches maturity it will be exempt from traditional securities registration.

This act will also impact interactions that financial institutions have in the market. While it will allow a national bank to use blockchain, it will restrict certain central banking practices. Looking deeper into the bill, it is not going to allow banks to include customer assets as liabilities on their balance sheets. This is to protect the customer because their assets are going to be treated as separate property rather than a debt or liability to the bank. This is extremely important for a consumer to look into because if a bank were to file for bankruptcy now, they could list your assets as liabilities and then they could be used to pay off other creditors. Keeping those assets off of the balance sheet helps ensure that they are strictly owned by the customer.

When should we see a decision on this act?

Although a first draft of the CLARITY Act passed the house in July of 2025, the path to passing the Senate remains a struggle. The Senate Agriculture Committee recently introduced an amended version to try to suit the neutral side, but there are many hurdles that it faces. Democrats are worried that there is not enough sufficient writing in ethics, worrying about public officials and higherups prioritizing loopholes for their personal gain. There has also been a huge running argument between the parties about handling finance, and no conflict has been settled yet, stalling progress even further. A primary example of this is whether crypto exchanges should be allowed to pay interest on stablecoin holdings. Banks think that this would harm financial stability, while the crypto industry thinks that banks are trying to cut competition. These bashing disagreements have exhausted companies, even causing Coinbase to withdraw its support to the bill earlier this year.

Ripple CEO Brad Garlinghouse has predicted a 90 percent chance that this act will be passed in mid April, which is extremely optimistic during a time of disagreement. He wants the industry to focus on progress instead of perfection, because he knows that not everyone will be able to have it their way; but regulations do need to be put into place. Although he is praising the expected approval rating coming in the near future, a lot of companies are still iffy on the proposed regulations and have been more stubborn in their mindset, lowering the prediction rate to around 40 percent. Although those are vastly different numbers that could determine the possibility of the act coming to fruition, we still have to wait for more rules and regulations as well as people compromising with one another on viewpoints. Ultimately, a final decision awaits both parties compromising on both ethical and financial disputes.

February 27, 2026

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