The CLARITY Act's Omission of Stablecoin Revenue: A Market-Disrupting Regulatory Blind Spot

The CLARITY Act of 2025, formally titled the Digital Asset Market Clarity Act, represents a landmark attempt to resolve jurisdictional conflicts between the SEC and CFTC over digital assets. By categorizing digital assets into three classes-digital commodities, investment contract assets, and permitted payment stablecoins-the Act sought to create a coherent regulatory framework. However, its omission of explicit provisions for stablecoin revenue classification has created a critical blind spot, one that risks destabilizing markets, distorting investor behavior, and complicating capital allocation strategies. This regulatory ambiguity, while perhaps unintentional, underscores the challenges of balancing innovation with oversight in the rapidly evolving crypto ecosystem.

Regulatory Risk: A Vacuum of Clarity

The CLARITY Act explicitly excludes stablecoins from the definition of "digital commodity" under the Commodity Exchange Act (CEA). This exclusion was intended to streamline oversight, delegating stablecoin regulation to the GENIUS Act, which mandates full asset backing and audit requirements for U.S. issuers. However, the Act does not address how revenue generated from stablecoin transactions-such as interest, fees, or staking rewards-should be classified for tax or regulatory purposes.

This omission leaves stablecoin revenue in a legal gray area. Under existing IRS guidance, stablecoins are treated as property, meaning transactions involving them trigger capital gains calculations. For businesses and investors relying on stablecoins for liquidity or cross-border payments, this creates operational complexity. A report by the Woodstock Institute highlights concerns that the CLARITY Act's lack of tax clarity could deter institutional adoption, as firms face uncertainty over compliance costs and liability.

Investor Behavior: Shifting Trust and Risk Appetite

The absence of a clear revenue framework for stablecoins has already begun to reshape investor behavior. With the GENIUS Act providing some regulatory assurance around asset backing, stablecoins have gained traction as a "safe" digital asset class. However, the lack of tax or revenue-specific rules introduces a layer of risk. According to a 2025 analysis by the Federal Reserve, stablecoins could incentivize consumers to shift savings from traditional bank accounts to crypto platforms, particularly if the latter offer higher yields or perceived flexibility.

This shift risks a fragmentation of trust in traditional financial intermediaries. For example, if a stablecoin issuer offers interest-bearing accounts without clear regulatory guardrails, investors may prioritize yield over safety, mirroring the dynamics of the 2023 crypto bank collapses. The CLARITY Act's failure to address revenue treatment thus creates a paradox: it legitimizes stablecoins as a financial tool while leaving critical risks unmanaged.

Capital Allocation Strategies: Innovation vs. Caution

The CLARITY Act's regulatory ambiguity has also influenced capital allocation strategies. Financial institutions now permitted to offer digital asset services under the Act are cautiously expanding into stablecoin-related products. However, the absence of revenue-specific rules complicates risk assessments. For instance, banks evaluating stablecoin-backed lending or securitization products must navigate uncertain tax implications and potential future regulatory retroactivity.

A 2025 report by the K&L Gates law firm notes that the Senate Finance Committee's ongoing debates over digital asset taxation have left market participants in limbo. Without clarity on whether stablecoin revenue will be taxed at the point of transaction or disposition, investors are hesitant to commit capital to long-term projects. This hesitancy is compounded by the fact that the CLARITY Act's focus on jurisdictional boundaries does not resolve broader questions about stablecoin stability, reserve transparency, or systemic risk.

Market Disruption: The Unintended Consequences

The CLARITY Act's omission has also amplified market volatility. While the Act aims to reduce regulatory overlap, its failure to address stablecoin revenue has created a "regulatory arbitrage" opportunity. For example, stablecoin issuers may exploit jurisdictional gaps to structure revenue streams in ways that minimize tax exposure, potentially undermining the Act's intent to foster a level playing field.

Moreover, the Act's exclusion of stablecoins from the CEA's definition of digital commodities has inadvertently shifted oversight to the GENIUS Act, which lacks the same robust enforcement mechanisms. Critics argue this creates a two-tiered system where stablecoins are subject to lighter scrutiny than other digital assets, increasing the risk of market manipulation or fraud.

Conclusion: A Call for Precision

The CLARITY Act's omission of stablecoin revenue classification is not merely a technical oversight-it is a systemic blind spot with far-reaching implications. By failing to address how stablecoin revenue is taxed, regulated, or integrated into broader financial systems, the Act leaves market participants exposed to regulatory risk, capital misallocation, and behavioral distortions.

As the crypto industry moves forward, policymakers must recognize that regulatory clarity cannot be achieved through jurisdictional carve-outs alone. The next phase of digital asset legislation must explicitly address stablecoin revenue, ensuring that innovation is neither stifled nor left to navigate a minefield of uncertainty. Until then, the market will continue to grapple with the unintended consequences of a framework that, for all its ambition, remains incomplete.