The CLARITY Act

The CLARITY Act

The CLARITY Act, which failed in a procedural vote on Sept. 15, and a new venture by the Trump family’s World Liberty Financial cryptocurrency company made us think it was time to write about the cryptocurrency legislation. Even though it’s not currently active, the bill could come back.

What does the CLARITY Act do?

The CLARITY Act sets up a regulatory structure for cryptocurrency or digital assets. The latest version of the bill defines a digital asset as “any digital representation of value which is recorded on a cryptographically-secured distributed ledger or other similar technology.” In other words, Blockchain-based cryptocurrencies, stablecoins, and other similar technologies meant to be used as money or investments.

Why do we need any laws about crypto at all?

Right now, there is no comprehensive regulatory structure for cryptocurrency. The CLARITY Act “aims to establish rules governing how digital assets are issued, traded, intermediated, and supervised across the U.S. financial system.”

A major point of contention between legislators within each chamber of Congress and between chambers is how to divide (or if it should be divided at all) oversight between the Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC). The SEC is much larger than the CFTC and has a reputation for more aggressive oversight than the CFTC. This version of the CLARITY Act gives the CFTC more power than the SEC. But at the same time, “The division would not assign every [cryptocurrency type] permanently to one agency. Classification would depend on the asset’s legal rights, offering structure, network development, issuer involvement, and the activity being regulated, which could leave some questions of regulatory authority involving both the SEC and the CFTC.”

What else is in those 600+ pages?

Punchbowl noted that the current version of the CLARITY Act includes a change to an existing law that would allow for criminal prosecutions related to blockchain issues. Specifically, “A key change would no longer explicitly shield certain decentralized finance developers from 18 USC 1960, the part of the federal criminal code that prohibits unlicensed money transmission. The liability protections are now civil, rather than criminal.”

This provision might be good for users of crypto, but is not popular with developers.

Punchbowl also says “Another provision directs the Treasury secretary to monitor for signs of bank deposit flight tied to stablecoin rewards 18 months after the enactment of the law. “ This is an attempt to address worries of (among others) community banks. NPR described the concerns of community banks in an article yesterday.

Trump and Crypto

President Trump has made truly staggering amounts of money ($1.4 billion reported for 2025) off of his own cryptocurrency and related digital assets through his family-owned World Liberty Financial. Would the CLARITY Act prevent him from further enriching himself while in office?

The answer here tends to depend on who you ask and which party they belong to. The Associated Press reported on September 14 that “Trump agreed to new ethics rules to get a crypto bill across the line”.

However, as Judd Legum of Popular Information noted, the CLARITY Act grandfathers in Trump’s existing business interests.

Nor does it appear to address a move also reported Monday morning by the Washington Sun in which wallets matching known holdings of President Trump and his sons were moved into “vesting contracts”. These contracts require that no sales occur for at least two years, e.g. the end of the President’s legally final term as president. Presumably, because the President already has these tokens and the CLARITY Act grandfathers in existing cryptocurrency ownership, nothing in this move would be affected by the law should it ever pass.

The current version of the CLARITY Act was apparently weak enough with respect to banking industry concerns for four Republicans to join all Democrats in voting no on a procedural vote that, for now, brings progress on the CLARITY Act to a halt.

What does that mean for you if you have opinions about the CLARITY Act?

There’s more time to learn about cryptocurrency if you need to, about the bill if you need to and to contact your members of Congress if you have concerns. You can get contact information for your members from the GovTrack homepage.

The CLARITY Act was originally published by GovTrack and is republished with permission.