CLARITY Act Aims to Clarify US Digital Asset Regulation

The CLARITY Act, or the Digital Asset Market Structure Clarity Act, is a significant piece of legislation introduced by Representative French Hill on May 29, 2025. This act aims to bring clarity to the regulatory landscape of digital assets in the United States, a sector that has long been plagued by ambiguity and inconsistent enforcement. The act seeks to define key terms such as blockchain, digital asset, and digital commodity, and to split regulatory oversight between the Securities and Exchange Commission (SEC) and the Commodities Futures and Trading Commission (CFTC) based on how a digital asset is used.

The CLARITY Act includes several key provisions. It establishes consistent legal definitions for digital assets, assigns regulatory roles to the SEC and CFTC based on the use of the digital asset, and creates a category of "investment contract assets" that can transition from securities to commodities if they become decentralized. The act also requires crypto businesses to register with the CFTC, allows limited fundraising without SEC registration for projects aiming to become decentralized, and defines mature blockchain systems as those not controlled by a single entity. Additionally, it protects self-custody rights, requires ongoing project disclosures, establishes delisting rules for unsafe tokens, preserves existing financial laws, and includes international coordination and anti-money laundering compliance.

The CLARITY Act is designed to eliminate confusion around digital asset classification and create a more predictable compliance environment for crypto businesses and investors. It aims to replace the current regulatory gray zone with structure and harmony, addressing the inconsistent enforcement actions and unclear rules that have hindered the crypto industry. The act defines jurisdiction boundaries, allows digital asset companies to register under appropriate frameworks, and promotes legal certainty in secondary market trading. This clarity is expected to benefit crypto companies, institutional investors, retail investors, and the overall innovation in the United States.

However, the CLARITY Act has faced criticism from various quarters. Consumer advocacy groups argue that it weakens SEC oversight and could increase scams and losses in the broader crypto market. Former CFTC chair Timothy Massad has criticized the act for complicating regulation rather than simplifying it. Senator Elizabeth Warren has warned that the act could allow large companies to sidestep the SEC by issuing crypto tokens classified as commodities. Top Democrats have also voiced opposition, arguing that the act shifts too much power away from the SEC and favors crypto industry interests over retail investor safety.

The CLARITY Act is being debated during Washington’s 'Crypto Week,' a period focused on digital asset policy with several bills under review. Officially introduced as H.R. 3633, the act has already been approved by both the House Agriculture Committee and the House Financial Services Committee. If it passes in the House, it will face scrutiny in the Senate, where support is growing but not guaranteed. The act marks a major milestone in codifying key definitions in federal law, outlining actionable paths for compliance, and reducing legal risk for innovators and investors. Its impact will be felt long after Crypto Week ends, as regulatory clarity is essential for the next generation of digital finance.