U.S. Senate Unveils CLARITY Act Draft to Restructure Digital Asset Oversight via Covered Assets Framework

The U.S. Senate Banking Committee has unveiled a discussion draft of the “CLARITY Act,” focusing on refining the regulatory framework for digital assets through the introduction of a “Covered Assets” classification. Released on July 22, 2025, the draft seeks to address gaps in market structure by redefining how certain digital assets are regulated, including custody, reporting, and oversight requirements. The Senate’s version aligns with the House-passed CLARITY Act, which received a 294-to-134 vote in June, but introduces distinct provisions such as the designation of “ancillary digital assets,” potentially expanding the scope of regulated activities and imposing stricter custodial standards [1]. The draft invites public feedback by early August, underscoring bipartisan efforts to clarify regulatory boundaries while balancing innovation with systemic risk mitigation [4].

The Senate’s approach diverges from the House by emphasizing a “Covered Assets” framework that may narrow federal oversight to assets meeting specific criteria, reducing regulatory ambiguity for market participants. This shift could influence how banks manage digital assets, particularly regarding capital allocation and risk assessment. However, the Senate’s GOP-led committee has also introduced provisions to address overlaps in capital requirements and stress testing methodologies, reflecting a focus on aligning supervisory practices with modern risks [5]. These adjustments highlight potential tensions between chambers, as the Senate seeks to reconcile market structure concerns with the House’s broader regulatory goals.

Industry stakeholders have expressed mixed reactions, with some welcoming the clarity but cautioning against overregulation that could stifle innovation. The Crypto Council for Innovation noted that the Senate’s legislative process may differ from the House’s version, though coordination between the Agriculture and Banking Committees is anticipated [1]. The White House has signaled support for the bill, with the Crypto Czar affirming President Trump’s commitment to advancing it as part of his campaign promises. However, the Senate’s 60-vote threshold ensures Democratic perspectives will play a pivotal role in shaping the final legislation.

The draft’s release coincides with broader legislative momentum, including the recently passed GENIUS Act and ongoing discussions about crypto’s role in financial infrastructure. By prioritizing market structure, the Senate aims to address challenges such as custody complexities, interagency coordination, and volatility in the digital asset sector. The bipartisan nature of the proposal, led by Chairman Tim Scott, suggests a pragmatic approach to balancing regulatory clarity with innovation. Final negotiations will likely focus on harmonizing definitions of “Covered Assets” and regulatory authority between the House and Senate, with outcomes dependent on stakeholder input and political negotiations [5].

The CLARITY Act’s evolution reflects a coordinated effort across regulators and lawmakers to address digital asset risks while maintaining financial stability. As the Senate seeks feedback, the final form of the legislation will shape the regulatory landscape for years, influencing how institutions navigate compliance and innovation in the crypto space [1].

Sources:

[1] [Banking Regulators Clarify Crypto Custody Expectations](https://www.paulhastings.com/insights/crypto-policy-tracker/banking-regulators-clarify-crypto-custody-expectations-congress-advances-landmark-digital-asset-legislation-and-senate-releases-market-structure-draft)

[2] [CLARITY Act passes House; US pushes for digital asset regulation](https://coingeek.com/clarity-act-passes-house-us-pushes-for-digital-asset-regulation/)

[3] [BLOCKCHAIN—Senate 'Regulation DA' discussion draft](https://www.vitallaw.com/news/blockchain-senate-regulation-da-discussion-draft-would-upend-key-parts-of-howey-test/sld01c653d8c4e12846a189880282db9c5fa6)

[4] [Crypto Brief - Lowenstein Crypto Newsletter - July 24, 2025](https://www.jdsupra.com/legalnews/crypto-brief-lowenstein-crypto-7621996/)

[5] [BPIInsights: July 26, 2025](https://bpi.com/bpinsights-july-26-2025/)