The Clarity Act, Briefly: What the Bill Contained and What’s Stepping In

U.S. agencies are scrambling to replace the law designed to anchor crypto markets under government oversight — but will these interim measures endure?

— It didn’t take long for U.S. market regulators to attempt to compensate for the collapse of the Clarity Act, though the initiatives by the Securities and Exchange Commission and the Commodity Futures Trading Commission may fall short as replacements.

— SEC Chair Paul Atkins has repeatedly stated — emphatically — that his agency required statutory backing for its actions, and that support never materialized.

OK, the Clarity Act is no more (for the time being). Most crypto advocates viewed this as a major setback for the industry. Yet how many truly understood what the bill entailed?

The Digital Asset Market Clarity Act was Congress’s latest attempt at a recurring idea: categorizing different types of cryptocurrencies and digital assets, and assigning clear regulatory authority over each.

Throughout the industry’s evolution in the U.S., firms like Coinbase and Kraken frequently clashed with regulators such as the SEC over permissible activities and whether issuing crypto was equivalent to launching a security. These disputes led to numerous enforcement actions, costly settlements, and controversy — often involving former SEC Chair Gary Gensler. (A moment for crypto insiders to boo and hiss.)

The Clarity Act would have resolved these issues while empowering the SEC’s sibling agency, the CFTC, with expanded authority — particularly full oversight of crypto commodity spot markets. Spot markets are where assets trade directly, and since Bitcoin…

This tug-of-war is distinctly American, stemming from the U.S. system’s fragmented regulatory structure, which separates securities and derivatives oversight unlike unified systems abroad. (Yes, everyone agrees it’s overly complex.) Determining which regulator governs which asset has been a minefield from the start.

Classifying blockchain-based assets and their regulators was a central goal of Clarity. The bill also included provisions to combat illegal finance. And — in a highly debated area — it aimed to grant limited legal immunity to DeFi software developers for how others use their code.

We’ll skip the details behind the bill’s downfall, which had little to do with its core mission. Instead, we’ll examine what fills the Clarity-shaped void in U.S. policy. Thanks to the SEC, we didn’t wait long.

The industry isn’t completely starting over after Clarity collapsed. Case in point: the SEC. Under a leader chosen by crypto-friendly President Donald Trump, SEC Chair Paul Atkins began his term prioritizing digital asset regulations. With Clarity stalled, he now sees a duty to build what he can to fill the gap.

Before first responders finished checking Clarity’s vital signs, Atkins moved quickly two days later with a sweeping initiative to legitimize security tokenization within U.S. regulations — a hallmark of the SEC’s new crypto strategy. But that wasn’t the beginning or end of his plans.

He and CFTC Chair Mike Selig — a former crypto-focused official under Atkins — had already launched a joint digital assets initiative, starting with a framework for asset classification, known as a “taxonomy.” This was one of several internal policy efforts offering some guidance to the industry, though these measures lack durability, as they could be reversed by incoming agency leadership.

Atkins also advanced several formal initiatives:

— The SEC introduced its first major crypto rule last month, proposing Regulation Crypto Assets — a framework for fundraising via crypto offerings without triggering traditional regulatory burdens.

— Recently, the SEC floated a technical but pivotal rule allowing blockchain data to function as an official ownership ledger.

— The agency is also preparing to propose rules governing how investment advisers should safeguard digital assets.

Capital Alpha analyst Ian Katz noted that the SEC and CFTC can now “accelerate with aggressive, pro-industry proposals.”

“Republican leadership at these agencies can implement regulations without Democratic backing,” he wrote to clients following Clarity’s failure. “Some proposals may carry an implicit warning to Democrats: this is what happens when you don’t legislate.”

The SEC’s formal crypto rules — shaped by an all-Republican commission with two Democratic vacancies left unfilled by the White House — would require significant effort to reverse under new leadership (specifically, a commission named by a future Democratic president), though they’re not as permanent as laws. That latest high-profile SEC move on tokenization is intended as a trial run to inform future, harder-to-reverse policy — or even a revived Clarity Act, Atkins said.

Case B for policy momentum in Clarity’s wake is the CFTC, the smaller counterpart to the securities regulator. CFTC Chair Mike Selig also seized the post-Clarity opening to push crypto rulemaking, submitting a proposal on crypto transactions and markets to the White House for review on Friday.

The CFTC — where Selig is the sole sitting member of a five-person commission and thus able to act independently — has already started crafting rules for the crypto sector’s neighbor, prediction markets. It’s still developing crypto policy, though it recently signaled openness to crypto perpetual futures, or “perps.”

Selig has indicated his team is working toward labeling firms as “crypto asset markets,” similar to the CFTC’s existing category of designated contract markets (DCMs).

So the SEC and CFTC have a flurry of projects underway to create a patchwork version of what Clarity would have established. Many face shaky ground and may not deliver the industry’s desired certainty. These measures are also more susceptible to legal challenges since they aren’t grounded in law, which could further delay progress if courts intervene.

In short, there’s a reason Atkins kept insisting for months that the Clarity Act was essential. As he put it in August, “Legislation remains indispensable to enacting ‘future-proofed’ rules of the road that are durable enough to protect the work we are undertaking today from being undone by a future rogue regulator.”

“Rogue” is subjective, but despite Atkins’ eagerness to forge ahead with rules now (based on what he views as existing SEC authority), he’s remained firm in his public stance. “Indispensable,” he said of Congress.

In speeches this year and last, he made nearly identical future-proof statements: “Only Congress can future-proof regulation in this space.”

But he’s also consistently said his agency can support that legislative effort.

“What I envision aligns with legislation currently under consideration by Congress and aims to complement, not replace, Congress’s critical work,” he said when launching his Project Crypto in November. However, the project — for now — operates in isolation.

As stablecoins integrate into traditional finance, APAC is emerging as a vital testing ground. This report explores the region’s regulations, applications, and RLUSD’s role.

Why it matters:

As stablecoins integrate into traditional finance, APAC is emerging as a vital testing ground. This report explores the region’s regulations, applications, and RLUSD’s role.