The CLARITY Act, crypto market infrastructure legislation, was approved in the US House of Representatives a year ago in July of 2025. Today, the vital legislation is mired in discussion in the US Senate as traditional finance, crypto detractors and industry supporters battle to create legislation that supports their regulatory perspective.
The CLARITY Act is strategically important for the United States as the financial sector migrates to digital finance. As the rest of the world is on a similar path, the US is poised to define other jurisdictional rules, including important investor protection and regulatory requirements as other countries are keenly watching the development of a regulatory regime. This is not just about digital securities and digital commodities it is how digital assets are defined, how they can be issued and managed.
On the one side, traditional finance like establishment banks, fear competition and its impact to the industries bottom line. A perfect example is yield on stablecoins and the manufactured concern that banks could see a decline in deposits thus impacting lending. Of course this ignores the fact that banks can compete on a level playing field with digital asset native firms and, traditional banks are already heading in this direction. They just want more time.
On the other side, fear mongers amongst policymakers predict a fraud apocalypse that ignores the language in the bill to ensure AML/KYC compliance and that digital assets can be easily tracked.
The crypto industry has been blessed with money and a sophisticated leadership that recognizes change is hard but it takes a lot of money to sway elected officials. This, alongside a supportive executive has helped to promote regulatory clarity along with supporters in Congress.
Unfortunately it is Congress that is the bottleneck. Yesterday, Senator Elizabeth Warren issued another statement declaring the CLARITY act as a “ticket to sanctions evasion.” The Senator has consistently pursued a policy of FUD regarding crypto, and ironically ends up being aligned with the establishment banking sector – another industry she deplores. The Senator ignores the reality that the CLARITY Act strengthens AML/KYC protocols as it designates platforms engaged in crypto as falling under the Bank Secrecy Act which requires bank like compliance.
And it does not matter to the Senator that consumers could be a huge beneficiary of the bill.
Senator Cynthia Lummis, a longtime proponent of digital assets, warns that an inability to pass the bill will put the US at a disadvantage when competing with the rest of the world. Posting on X, Lummis stated:
“This is likely our last chance to get real legislation for digital assets on the books before 2030. If we fail to pass the Clarity Act, we are ensuring another country will write the rules for digital assets and we spend the next decade catching up.”
Some innovators have previously decamped from the US to friendlier locales and failed legislation could drive more crypto firms away from US markets.
An updated bill was expected to be distributed this past weekend but it was a no show. As the summer recess nears, and focus shifts to midterms, an inability to get the legislation to a floor vote could crater the bill. It has happened before.
The odds of the bill becoming law have been on the decline. Polymarket has passage at 45% right now. In May, it was around 75%.
As the opponents point out perceived shortcomings, some politicians worry that supporting the bill could upset key constituents and financial backers. This is the reality of Washington, DC where leadership is too often ceded to political goals to the detriment of beneficial policy. And Congress has a history of making mistakes and taking too long to address reforms due to ego and ideology.
The CLARITY Act will certainly not be perfect legislation if it passes, that is how laws are made. But this is a clear instance of seeking perfection and parochial desires harming the better for all the wrong reasons.