What Is the CLARITY Act?
The Digital Asset Market Clarity Act of 2025 — commonly referred to as the CLARITY Act — is a proposed U.S. federal law that seeks to establish a comprehensive regulatory framework for digital assets.[reference:0] Introduced in the House on May 29, 2025, by Representative French Hill (R-AR), the bill has passed the House with a bipartisan vote of 294-134 and cleared the Senate Banking Committee with a 15-9 vote.[reference:1][reference:2][reference:3]
The CLARITY Act is designed to address the long-standing regulatory uncertainty that has plagued the cryptocurrency industry. Currently, digital asset markets operate with fragmented oversight and outdated rules.[reference:4] The bill aims to replace the SEC's "regulation-by-enforcement" model with a workable statutory framework, providing clear rules of the road for digital asset projects, investors, and intermediaries.[reference:5]
📊 Legislative Status Snapshot
⚠️ Status as of July 2026. Check congress.gov for updates.
The CLARITY Act is the product of more than six months of bipartisan negotiations and extensive engagement with regulators, law enforcement, academics, and industry stakeholders.[reference:8] If enacted, it would mark one of the most transformative crypto regulatory frameworks ever proposed in the United States.[reference:9]
Regulatory Framework: SEC vs. CFTC
One of the most significant aspects of the CLARITY Act is its clear allocation of regulatory jurisdiction between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).[reference:10]
CFTC Jurisdiction
The CLARITY Act would grant the CFTC exclusive jurisdiction over spot markets in "digital commodities."[reference:11][reference:12] This includes digital commodity exchanges, brokers, and dealers.[reference:13] The CFTC would also have anti-fraud and anti-manipulation enforcement authority over digital commodities, including in cash or spot transactions.[reference:14]
SEC Jurisdiction
The SEC would retain jurisdiction over digital assets that qualify as securities or are offered as part of an investment contract (using the Howey test).[reference:15] The bill would also provide the SEC with jurisdiction over digital commodity activities and transactions engaged in by certain brokers and dealers on alternative trading systems and national securities exchanges.[reference:16]
Joint Oversight
The bill establishes a joint SEC-CFTC Advisory Committee designed to harmonize digital asset regulatory requirements.[reference:17] The SEC and CFTC would also share oversight of "permitted payment stablecoins."[reference:18]
The Three Categories of Digital Assets
The CLARITY Act divides digital assets into three distinct categories, each with its own regulatory treatment.[reference:20]
1. Digital Commodities
A digital commodity is defined as "a digital asset that is intrinsically linked to a blockchain system, and the value of which is derived from or is reasonably expected to be derived from the use of the blockchain system."[reference:21][reference:22] This category would include assets like Bitcoin and Ethereum, as well as many utility tokens.[reference:23] Digital commodities would be regulated by the CFTC.[reference:24]
2. Securities
Digital assets that qualify as securities or are offered as part of an investment contract would remain under SEC jurisdiction.[reference:25] The bill clarifies that an "investment contract" does not include an "investment contract asset," meaning that a token sold through an investment contract can ultimately trade as a digital commodity rather than a security.[reference:26][reference:27]
3. Stablecoins
Stablecoins are treated as a separate category. The bill would generally exclude stablecoins from the definition of digital commodity.[reference:28] The CFTC and SEC would share oversight of "permitted payment stablecoins."[reference:29] Notably, passive yield on stablecoin balances is banned under the bill's current formulation, meaning crypto platforms can no longer offer interest-like returns for holding dollar-backed stablecoins.[reference:30]
The "Mature Blockchain" Standard
A central concept in the CLARITY Act is the "mature blockchain" standard. This standard determines whether a digital commodity can be traded on regulated exchanges and qualify for certain exemptions.[reference:32]
Definition of a Mature Blockchain
Under the CLARITY Act, a mature blockchain is defined as "a blockchain system, together with its related digital commodity, that is not controlled by any person or group of persons under common control."[reference:33][reference:34]
To qualify as mature, a blockchain must meet several criteria[reference:35]:
- The value of the digital commodity must be "substantially derived from the use and functioning of the blockchain."
- The blockchain must not restrict or privilege any users.
- Ownership by any single entity or group must be limited to less than 20% of outstanding units.
Certification Process
The bill would allow a digital commodity issuer to certify to the SEC that its related blockchain is mature.[reference:36] The SEC would assess the blockchain's maturity based on the criteria outlined in the bill.[reference:37]
Impact of Maturity Status
Maturity (or intended maturity) is a precondition for certain features of the bill's framework.[reference:38] Digital commodities on mature blockchains can be traded on regulated exchanges and may qualify for exemptions from SEC registration.[reference:39] Issuers of digital commodities related to blockchains that are not mature would have additional reporting requirements.[reference:40]
Issuance Safe Harbor and Documentation
The CLARITY Act creates a safe harbor for issuers of digital commodities, providing a clear path from token issuance to public trading.[reference:41]
Safe Harbor for Primary Issuances
The bill provides an exemption from the Securities Act of 1933's registration requirement for offers of investment contracts involving digital commodities on mature blockchains that meet certain conditions.[reference:42] Issuers relying on the exemption would be required to[reference:43]:
- Limit sales of digital commodities to $75 million over a 12-month period.
- File an "offering statement" with the SEC, providing disclosures about the project, the token, and the associated risks.[reference:44]
Documentation Requirements
The bill establishes a tailored disclosure regime that allows responsible digital asset projects to raise capital while protecting investors and preventing market manipulation.[reference:45] Key documentation requirements include[reference:46]:
- Offering statements for issuers relying on the safe harbor.
- Additional reporting requirements for issuers of digital commodities related to blockchains that are not yet mature.
- Disclosures to the SEC for digital asset securities.[reference:47]
Secondary Market Trading
The bill spells out when secondary-market trades of tokens fall outside the federal securities laws, providing clarity for exchanges and investors.[reference:48] Traditional securities market participants registered with the SEC could engage in secondary market trading upon notification to — but not registration with — the CFTC, provided regulation by the two agencies is "consistent."[reference:49]
Comparison: CLARITY Act vs. Current Regulatory Landscape
The table below compares key aspects of the proposed CLARITY Act framework with the current regulatory landscape for digital assets in the United States. Data is illustrative and subject to change.
| Feature | Current Landscape | Under CLARITY Act (Proposed) |
|---|---|---|
| Regulatory Clarity | Fragmented oversight, regulation-by-enforcement[reference:50] | Clear statutory framework with bright line between SEC and CFTC[reference:51] |
| Digital Asset Classification | Determined case-by-case via Howey test; often uncertain[reference:52] | Three clear categories: securities, digital commodities, stablecoins[reference:53] |
| Primary Issuance | Must register as security or rely on uncertain exemptions | Safe harbor for up to $75M over 12 months with disclosure[reference:54] |
| CFTC Jurisdiction | Limited to derivatives and futures markets | Exclusive jurisdiction over spot markets for digital commodities[reference:55] |
| AML/CFT Requirements | Varies; many intermediaries operate without clear obligations[reference:56] | Bank Secrecy Act applies to all digital asset intermediaries[reference:57] |
| DeFi and Developers | Potential liability risk for software developers | Explicitly protects software developers and peer-to-peer activity[reference:58] |
| Custody Standards | Fragmented; varies by state and platform | Federal Qualified Digital Asset Custodian (QDAC) standards[reference:59] |
| Stablecoins | Limited federal oversight | Separate category; passive yield banned; shared SEC/CFTC oversight[reference:60][reference:61] |
⚠️ This comparison is for educational purposes only. The final enacted legislation may differ from the current version.
Common Compliance Triggers
Under the CLARITY Act, certain activities would trigger regulatory obligations for digital asset market participants. Understanding these triggers is essential for compliance.
1. Operating as a Digital Commodity Exchange
Any platform that facilitates trading in digital commodities would be required to register with the CFTC as a digital commodity exchange, broker, or dealer.[reference:62] This would apply to both centralized and decentralized platforms that meet the definition of an intermediary.
2. Issuing Digital Commodities
Issuers of digital commodities would need to file offering statements with the SEC and comply with disclosure requirements.[reference:63] Issuers of digital commodities related to blockchains that are not mature would have additional reporting obligations.[reference:64]
3. Custodying Customer Assets
Custodians of digital assets would be subject to Qualified Digital Asset Custodian (QDAC) standards, including asset segregation, recordkeeping, and audit trail requirements.[reference:65]
4. Engaging in DeFi Activities
Centralized digital asset intermediaries that interact with DeFi protocols would be subject to tailored risk-management, cybersecurity, and compliance standards.[reference:66] The bill also includes a tailored rulemaking for intermediaries that are not truly decentralized.[reference:67]
5. Facilitating Cross-Border Transactions
The bill strengthens sanctions compliance and authorizes the Treasury Department to address high-risk foreign activity.[reference:68] Intermediaries would need to implement sanctions screening and reporting mechanisms.
Risk Controls and Best Practices
The CLARITY Act introduces several risk controls designed to protect investors and maintain market integrity. Understanding these controls is essential for compliance and risk management.
🔒 Custody and Asset Protection
- Asset Segregation: Customer assets must be separated from custodians' own assets[reference:69]
- Prohibition on Commingling: Assets cannot be mixed unless explicitly authorized[reference:70]
- No Rehypothecation: Custodians cannot rehypothecate assets without consent[reference:71]
- Exclusive Control: Custodians must maintain exclusive control over customer assets[reference:72]
📊 Recordkeeping and Transparency
- Trade Monitoring: Exchanges must monitor and report suspicious activity[reference:73]
- Recordkeeping: Thorough recordkeeping and detailed audit trails required[reference:74]
- Disclosure Requirements: Enhanced disclosures for custody and insolvency scenarios[reference:75]
- Financial Literacy: Promotes coordinated oversight and financial literacy[reference:76]
🚫 Illicit Finance Controls
- AML Programs: Anti-money laundering programs required for all intermediaries[reference:77]
- Customer Identification: KYC requirements apply to all digital asset intermediaries[reference:78]
- Suspicious Activity Monitoring: SARs must be filed for suspicious transactions[reference:79]
- Sanctions Compliance: Intermediaries must comply with sanctions laws[reference:80]
⚖️ Enforcement and Accountability
- Anti-Fraud Authority: CFTC has anti-fraud authority over digital commodities[reference:81]
- Business Conduct Standards: Broker-dealers must develop business conduct standards[reference:82]
- Insider Abuse Prevention: Limits on insider abuse and market manipulation[reference:83]
- Anti-Evasion Protections: Protections targeting evasion of rules[reference:84]
Practical User Checklist
If the CLARITY Act is enacted, or if you are preparing for its potential passage, use this checklist to assess your compliance readiness.
- Understand your asset classification — Determine whether your digital asset is a security, commodity, or stablecoin under the CLARITY Act.
- Assess your blockchain's maturity — Evaluate whether your blockchain meets the "mature blockchain" standard.
- Review your issuance documentation — Ensure you have offering statements and disclosures in place if relying on the safe harbor.
- Implement AML/CFT programs — Develop and implement anti-money laundering and counter-terrorist financing programs.
- Establish customer identification procedures — Implement KYC processes for all customers.
- Set up suspicious activity monitoring — Create systems to monitor and report suspicious transactions.
- Review custody arrangements — Ensure compliance with QDAC standards, including asset segregation and recordkeeping.
- Assess your status as an intermediary — Determine if you are a digital commodity exchange, broker, or dealer and need to register with the CFTC.
- Evaluate your DeFi activities — If you interact with DeFi, ensure compliance with risk-management and cybersecurity standards.
- Implement sanctions screening — Screen customers and transactions against sanctions lists.
- Prepare for SEC and CFTC oversight — Understand your reporting and disclosure obligations to both agencies.
- Consult legal counsel — Seek professional advice on your specific compliance obligations.
Real‑World Scenario
🏗️ Scenario: A Token Project Prepares for CLARITY Act Compliance
NovaChain is a startup building a layer‑1 blockchain designed for decentralized applications. They have conducted a private token sale and are planning a public offering. With the CLARITY Act moving through the Senate, the team decides to proactively prepare for compliance.
They take the following steps:
- Asset Classification: They consult legal counsel to determine whether their token is a digital commodity or a security under the CLARITY Act's definitions. They conclude that, given the token's utility and the network's decentralization roadmap, it is likely to qualify as a digital commodity once the blockchain matures.
- Maturity Assessment: They evaluate their blockchain against the "mature blockchain" criteria. They note that they need to reduce any single entity's ownership stake to below 20% and ensure the network is not controlled by any person or group.
- Safe Harbor Preparation: They prepare an offering statement to file with the SEC, limiting their public sale to $75 million over 12 months, as permitted under the bill's safe harbor.[reference:85]
- AML/CFT Implementation: They implement KYC procedures, an AML program, and suspicious activity monitoring, recognizing that the CLARITY Act would apply Bank Secrecy Act requirements to their operations.[reference:86]
- Custody Arrangements: They partner with a Qualified Digital Asset Custodian that meets the segregation, recordkeeping, and audit trail standards under the bill.[reference:87]
Outcome: By taking proactive steps, NovaChain positions itself to operate confidently under the new regulatory framework, should the CLARITY Act become law. The team remains flexible, knowing that the final legislation may differ from the current version.
Common Mistakes
When preparing for the CLARITY Act or navigating the current regulatory landscape, many market participants make the same errors. Here are the most common pitfalls to avoid.
- ❌ Assuming the CLARITY Act is already law: The bill has not yet passed the Senate or been signed into law. Relying on it prematurely could lead to compliance gaps.
- ❌ Misclassifying your digital asset: Incorrectly categorizing your token as a commodity when it is actually a security could result in enforcement action. Seek professional advice.
- ❌ Ignoring AML/CFT requirements: Even before the CLARITY Act, many digital asset activities are subject to AML regulations. Failing to implement adequate controls is a significant risk.
- ❌ Overlooking the "mature blockchain" standard: Achieving maturity is not automatic. Projects must actively work toward decentralization and reduced concentration of ownership.
- ❌ Not preparing documentation: Even with a safe harbor, issuers must file offering statements and comply with disclosure requirements. Failing to do so could void the exemption.
- ❌ Assuming DeFi is unregulated: The CLARITY Act explicitly targets centralized intermediaries that interact with DeFi, and provides a tailored rulemaking for those that are not truly decentralized.[reference:88]
- ❌ Neglecting custody standards: Even if you are not a custodian, you may be subject to custody rules if you hold customer assets. Understand the QDAC requirements.
- ❌ Waiting until the last minute: Compliance preparation takes time. Proactive planning is more effective than reactive scrambling.
- ❌ Not consulting legal counsel: The CLARITY Act is complex, and the regulatory landscape is evolving. Professional advice is essential.
- ❌ Failing to monitor legislative developments: The final text of the CLARITY Act may differ from the current version. Stay informed about amendments and changes.
Risk Warning
⚠️ Important Risk Disclosure
This article is for educational and informational purposes only. It does not constitute financial, legal, or tax advice. The CLARITY Act is proposed legislation that has not yet been enacted. Its final form, if enacted, may differ significantly from the current version.
Specific risks associated with the CLARITY Act and cryptocurrency regulation include:
- Legislative uncertainty: The bill may not pass, or it may be amended in ways that change its impact on the industry.
- Regulatory risk: Even if the CLARITY Act is enacted, implementing regulations could create additional compliance burdens.
- Enforcement risk: Failure to comply with the new framework could result in enforcement action, fines, or other penalties.
- Market risk: Regulatory changes can affect market sentiment and asset prices, potentially leading to volatility.
- Operational risk: Adapting to new regulatory requirements can be costly and time-consuming, particularly for smaller projects.
- International risk: The CLARITY Act is a U.S. law. Projects operating globally may face conflicting regulatory requirements in different jurisdictions.
- Interpretation risk: The meaning of key terms (e.g., "mature blockchain," "digital commodity") may be subject to interpretation and could evolve over time through rulemaking and litigation.
Always consult with qualified legal, tax, and financial professionals before making any decisions based on this information. This guide is a starting point for your research, not a substitute for professional advice.
Frequently Asked Questions
What is the CLARITY Act in cryptocurrency regulation?
The CLARITY Act (Digital Asset Market Clarity Act of 2025) is a proposed U.S. federal law that aims to establish a clear regulatory framework for digital assets. It would allocate jurisdiction between the SEC and CFTC, define digital commodities, and create a path for tokens to transition from securities to commodities.[reference:89]
What are the three categories of digital assets under the CLARITY Act?
The CLARITY Act divides digital assets into three categories: (1) securities, (2) digital commodities, and (3) stablecoins. Digital commodities are assets intrinsically linked to a blockchain's use, while securities remain under SEC oversight.[reference:90]
What is the difference between SEC and CFTC jurisdiction under the CLARITY Act?
Under the CLARITY Act, the CFTC would have exclusive jurisdiction over spot markets for digital commodities, including exchanges, brokers, and dealers. The SEC would retain authority over digital assets that qualify as securities or are offered as investment contracts.[reference:91][reference:92]
What is a 'mature blockchain' under the CLARITY Act?
A "mature blockchain" is defined as a blockchain system that is not controlled by any person or group, with no single entity owning more than 20% of the units. It must also have its value substantially derived from the use and functioning of the blockchain.[reference:93][reference:94]
How much can a project raise under the CLARITY Act's safe harbor?
The CLARITY Act provides an exemption from SEC registration for issuers of digital commodities on mature blockchains, allowing them to raise up to $75 million over a 12-month period, provided they file an offering statement with the SEC.[reference:95]
What are the anti-money laundering (AML) requirements under the CLARITY Act?
The CLARITY Act applies Bank Secrecy Act regulations to digital asset intermediaries, requiring them to implement AML programs, monitor suspicious activity, identify customers, and comply with sanctions laws.[reference:96]
Does the CLARITY Act protect software developers and DeFi protocols?
Yes, the CLARITY Act explicitly protects software developers and peer-to-peer activity, treating developers who publish code without controlling customer funds as non-intermediaries. It also provides a decentralization safe harbor for DeFi projects.[reference:97]
What is the current status of the CLARITY Act?
As of July 2026, the CLARITY Act has passed the House (294-134) and cleared the Senate Banking Committee (15-9). It is currently on the Senate legislative calendar awaiting a floor vote. Its passage remains uncertain but is a high priority for July 2026.[reference:98][reference:99]