Congress Weighs Clarity Act to Set Federal Crypto Rules

The Clarity Act is a bill that would establish a federal market structure for digital assets. It aims to define how tokens are treated under federal law, set registration and custody standards for platforms, require disclosures for issuers, and expand tools for law enforcement to pursue fraud.

Backers include Patrick McHenry, the former chair of the House Financial Services Committee, who retired in January 2025 and now works as a senior adviser at Lazard. In a July 16 post on X he urged lawmakers to move beyond what he called “reactive regulation.” In an opinion piece he described the bill as the most important forward-looking technology law since the Telecommunications Act of 1996.

The legislation would clarify whether specific tokens are regulated as securities, commodities, property or another category. That classification would affect registration pathways for trading platforms, custody rules for asset holders, and required disclosures for token sales and secondary market activity.

Industry officials have framed the decision for Congress as a choice between clearer federal standards and the risk of repeated exchange failures. Collin McCune, head of government affairs at Andreessen Horowitz, framed the bill as a way to define legitimate business practices and give regulators clearer standards to enforce.

Law enforcement and consumer advocates say federal clarity would make it easier to trace illicit transactions, freeze assets tied to fraud and protect retail investors harmed by exchange collapses and token failures. Industry groups say clearer definitions could lower compliance costs over time and make it simpler for regulated firms to operate across states.

Multiple related bills, including bipartisan market-structure proposals such as the GENIUS Act, are circulating in Congress. Supporters argue that passing the Clarity Act would create a nationwide baseline of rules. McHenry has argued that capital and innovation flow to jurisdictions with predictable rules and defined property rights.

Timing for legislative action remains uncertain. McHenry and other backers are pressing lawmakers to act before another high-profile market failure prompts reactive policy changes. As the bill moves through committees, lawmakers, industry participants, consumer advocates and regulators are expected to negotiate changes to the text. How Congress balances investor protections, law enforcement needs and rules for firms will determine the legal framework that applies to U.S. crypto markets.