House Passes CLARITY Act Dividing Crypto Oversight 294-133

The US House of Representatives passed the CLARITY Act, a landmark cryptocurrency market structure bill, on Thursday. The bill, which divides authority over digital assets between the Commodity and Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC), was approved with a vote of 294-133, with 78 Democrats voting in favor.

The legislation establishes a formal definition for “digital commodities,” which would fall under the CFTC’s jurisdiction, while cryptocurrencies classified as securities would be the SEC’s responsibility. This division of authority aims to provide clarity and structure to the cryptocurrency market, which has long been plagued by regulatory uncertainty.

However, the bill has faced criticism from some representatives who argue that it does not provide enough oversight of the industry and leaves gaps that could harm cryptocurrency users. Democrat Sydney Kamlager-Dove, for instance, stated during the debate that the bill creates more confusion than clarity.

Some industry stakeholders have also raised concerns about the bill's treatment of decentralization. The legislation considers sufficiently decentralized blockchains, defined as transparent chains with no person or individual in control, as commodities. This definition has been met with mixed reactions, with some advocating for further refinement to close existing regulatory gaps.

Crypto advocacy group DeFi Education Fund, for example, noted that the bill does not extend federal preemption to the ‘exclusions for decentralized finance activities,’ potentially leading to a patchwork of state laws. Despite these concerns, the group acknowledged that the bill has positive aspects, such as allowing for self-custody and excusing certain protocols and software engineers from some reporting and regulatory requirements.

The bill now moves to the Senate, where its path to becoming law could face obstacles. Senate Democrats have expressed concerns that the legislation lacks sufficient consumer protections and could benefit President Trump’s crypto business interests.

The passage of the CLARITY Act marks a significant step towards establishing a regulatory framework for the cryptocurrency industry in the US. While the bill has its critics, it represents a bipartisan effort to address the long-standing issue of regulatory uncertainty in the crypto market. The outcome in the Senate will be crucial in determining the future of this legislation and its impact on the industry.