Momentum Builds for CLARITY Act as Congress Seeks U.S. Crypto Rules

Congress has accelerated work on the CLARITY Act, a bill intended to set federal rules for cryptocurrencies by defining digital assets, clarifying which agencies have oversight, and creating compliance pathways for market participants. Sponsors and committee leaders have scheduled hearings and markups this month with the goal of advancing the measure before the end of the congressional session.

Key provisions under discussion include a legal definition of “digital asset,” a test for when a token should be treated as a security, a registration and oversight regime for trading platforms and custodians, and a formal allocation of supervisory authority between the Securities and Exchange Commission and the Commodity Futures Trading Commission. Lawmakers are also debating language that would preempt or preserve state licensing requirements.

The push for a federal framework follows a series of enforcement actions by federal agencies, several exchange failures, and market losses that highlighted gaps in consumer protections and custody rules. Industry trade groups and major crypto firms have lobbied for uniform definitions and national rules to avoid complying with multiple state regimes. Consumer advocates and some state regulators have pressed for stronger protections for stablecoins, lending products, and disclosures for retail investors.

Committee negotiators are working through technical language on how to treat tokens used primarily as payments versus tokens viewed as investment contracts. The bill text under review addresses decentralized finance platforms, custody of client assets, recordkeeping, and anti-money-laundering controls for intermediaries.

Opponents say some proposed definitions could favor large exchanges or exempt certain products from securities laws. Other critics want clearer consumer remediation mechanisms and higher capital or insurance requirements for custodians. State banking regulators have warned that federal preemption of state rules could remove local protections.

Industry reaction has been varied. Major exchanges, custody providers and trade associations have urged Congress to create a stable national framework that allows firms to operate across state lines. Smaller firms and some state regulators have called for caution and retention of local oversight tools.

If the CLARITY Act clears committee votes, it could move to floor consideration where amendments are expected. Legal specialists identify the definition of when a token is a security as likely the most contested element because it determines which agency can bring enforcement actions and which offerings require registration.

Lawmakers and administration officials have pointed to recent agency actions and sector failures as reasons for statutory clarity. Proponents say a federal statute would reduce litigation over regulatory boundaries, streamline oversight, and provide clearer disclosure standards for investors. The bill’s progress will depend on negotiations over technical definitions and the allocation of regulatory authority.