The U.S. Senate Banking Committee unveiled the reworked version of the much awaited CLARITY Act on Tuesday. Ahead of its upcoming markup later this week, the draft crypto market structure bill has received a positive response from the crypto community which is eagerly awaiting the passage of the bill.
The proposed legislation aims to resolve the judicial turf war between the SEC and the CFTC while shaping a structured roadmap for digital assets to enter the national financial ecosystem.
The draft bill declares BTC and ETH as non-securities based on their status as “Principal Assets of a Spot ETP”. This exempts them from the SEC’s jurisdiction that maintains strict and expensive requirements for reporting and accounting compared to commodities. The development essentially opens up the two biggest crypto assets as legally protected and recognized assets for every bank in the U.S. to engage with.
Furthermore, the revamped version of the CLARITY Act allows crypto platforms to pay yeilds to their users holding stablecoins under the condition that they remain active participants in activities like staking, loyalty programmes, and liquidity protocols. Passive yeilds on stablecoin holdings will be prohibited under the law.
Crypto leaders react
The top names from the crypto sphere have joined CLARITY Act-related discussions on social media, exhibiting support. In the backdrop of the ongoing discussions, Bitcoin was trading at $80,520 as of press time. Analysts have time and again predicted that a positive development around the bill could nudge the market into a bullish momentum.
The markup of the bill, slated for Thursday, will be a formal committee session where policymakers will go through the proposal once more and see if any amendments need to be made before sending the bill to the full chamber for a vote.
Bitcoin evangelist Michael Saylor said that the upcoming markup session for CLARITY Act would give Bitcoin a major institutional validation.
Faryar Shirzad, the chief policy officer of Coinbase, expressed excitement for the CLARITY Act to be moving forward for a markup this week.
“We’re reviewing the details of the CLARITY Act text released overnight, but it’s clear that this is a strong compromise and a result of hard work from all parties involved,” Shirzad posted on X.
Alex Thorn, the Head of Firmwide Research at Galaxy Digital, pointed out that the new CLARITY Act proposal brings substantial re-writes compared to the initial proposal that was put forward in January and had seen a major pushback from industry players like Coinbase. The new bill, as pointed by Thorn, adds more clarity to the defininations of DeFi and CeFi while narrowing the scope for tokenization authority limitations by the SEC.
The Ethics conundrum and high stakes markup
Senator Elizabeth Warren from the Democratic party, known for her rather anti-crypto stance, has raised ethics-related concerns around the CLARITY Act. Warren has criticized the bill for not including the ethics provision preventing federal officers and people in power from profiting from the legislation.
“This bill puts investors, our national security and our entire financial system at risk – and it will turbocharge Donald Trump’s crypto corruption. In just one year in office, the President and his family have raked in at least $1.4 billion in gains from crypto deals alone, and yet this bill stunningly includes zero provisions to prevent that,” Warren said.
The lack of this provision is what makes the markup session for the CLARITY Act high stakes.
Earlier last week, Senator Kristen Gillibrand had said at the Consensus conference in Miami that the regulators were working to define this ethics provision. however, its absense from the proposed bill does raise questions.
Patrick Witt, the Executive Director of the President’s Council of Advisors for Digital Assets, praised Senator Warren for her insights.
Senator Tim Scott, the chairman of the U.S. Senate Banking Committee released the draft bill to the public on Tuesday. Announcing the development, the senate committe said that this CLARITY Act aims to encourage innovation in the U.S. while safeguarding investors and laying the groundwork to keep illicit financial practices at bay.
Senator Scott said the legislation will clear up the regulatory approach towards digital assets for families, small businesses, and investors looking to engage with the sector. He did not address the absence of the ethics provision.
Senator Cynthia Lummis and Senator Thom Tillis have been central figures and sponsors behind the CLARITY Act. Both have maintained that the passing of the CLARITY Act will give a solid shape to U.S.’ crypto industry and become crucial in making the U.S. the crypto capital of the world, as envisioned by U.S. President Donald Trump.
More from the proposed bill
The proposed bill creates a legal pathway for assets to transition from securities to commodities just like BTC and ETH by proving their status of decentralization.
The guidelines grants national and state banks the option to offer crypto custody, market making, and underwriting without prior regulatory approval.
Software developers, wallet creators, and node operators, under the bill, will not be treated as money transmitters making a major win for the DeFi sector. The document also protects the rights to maintain “self-custodial” wallets, to keep users from being forced to use centralized intermediaries for all transactions.