Why the CLARITY Act Matters

Crypto has spent most of its life operating in the grey. Rules from legislators and governments were unclear, and it became a bit of bingo for us veterans as we sat through seasonal headlines of China or India banning the asset class. 

What we’re talking about in today’s Squawk, is a coming-of-age moment for the industry: the CLARITY act. You might have seen this topic mentioned a bit more lately in the media – and for good reason. Overnight the Senate Banking Committee ruled in favour of the act in  a 15-9 vote. Crypto is closer than ever to becoming entrenched in financial law, giving everyone a rulebook to follow in the US. 

So, we are going to take some time this week to set out the facts and explain simply and clearly what could be going to change in the crypto industry. No hype here. (Okay, maybe just a little). 

Let's dig in.  

What is it?

The CLARITY Act is a major US crypto market structure bill. In simple terms, it is a document trying to create clearer rules for digital assets, exchanges, token projects, stablecoins and parts of DeFi. As we mentioned at the top, very little of this is currently neatly laid out for the industry. 

To offer some perspective, certain crypto assets (like Bitcoin and Ethereum) are already being traded by institutions, through blue-chip issuers like BlackRock and Fidelity in exchange-traded funds (ETFs). There has also been guidance on stablecoins as an instrument, and how they will be treated in the GENIUS Act.  

But the rules around what different assets are, who regulates them, and clarity (sorry) for what crypto projects can and can’t do is still being worked out. 

That is why the CLARITY Act matters. It is not about making crypto suddenly risk-free or removing volatility from the market. It is about trying to get the industry out of the grey area and into a clearer operating environment. Allowing innovation to find a home and, hopefully, flourish.  

The journey to date

The House passed its initial version of the CLARITY Act in July 2025, and this week the US Senate Banking Committee released updated text ahead of a key ruling on May 14 (which eventually passed). But it’s not been clear sailing to get to this point. Let’s give a rundown of what the timeline has looked like: 

• July 2025 | The House passes the CLARITY Act 

  • This was a major moment for crypto regulation. This was no longer just an idea floating around Washington. A full crypto market structure bill had officially passed one side of Congress. 

• January 2026 | The Senate process hits a wall 

  • The next stage was much harder, with disagreements around stablecoin rewards dividing lobbyists and lawmakers. Other polarising topics were DeFi protections, tokenised assets, privacy and how much power different regulators should have. This was the roadblock moment. It showed the hard part was not agreeing that crypto needs rules, but agreeing on what those rules should actually be. 

• May 2026 | The next major update 

  • The Senate Banking Committee released update guidance and voted in favour of the bill on May 14. The next stop will be the Senate floor. 

With the decision landing very soon, it doesn’t necessarily mean the bill becomes law. It does however give us the answer to the question if lawmakers have worked through enough of the sticking points to move the CLARITY Act forward. 

What changes?

Let’s now talk about what clarity (sorry) will look like for the industry in a little more detail from the point of view of a few different stakeholders.  

• Crypto projects 

Token projects may get a new pathway called ‘Regulation Crypto’. This could provide operational clarity for innovators in the space. This ranges from projects trying to raise money, to measures to prevent insiders from dumping tokens into the market.   

There will also be more clarity on the role of developers, validators and networks for more explicit industry protection.  

NFTs are exempt from securities laws, unless they involve an investment contract. This puts the default treatment of NFTs as a collectable and digital token.  

• Exchanges 

The CLARITY Act could give a clearer idea of how an asset is regulated; answering whether it’s handled by the SEC (Securities and Exchange Commission) or the CFTC (Commodity Futures Trading Commission)? 

Asset listings would become more of a formal process and require public disclosures around. This could be good for consumers, as the goal here is to create more accountability.  

• Stablecoin businesses  

Clearer lines around rewards/yields, which has been a contentious topic. Big banks have made it clear they don’t want stablecoins acting like a high-yield deposit account, but crypto companies want to keep customer rewards alive. There may be a compromise around active vs passive rewards, although specifics are unclear. 

• Defi  

Protocols get more protection, but they will also encounter more sanctions for offering products to restricted geographies. An emphasis on KYC practices will be needed.  

Now I haven’t covered every single detail of the bill, just enough to hopefully give you more of an outline of what this push will bring for the industry – from developers, to exchanges to everyday consumers.  

See you next time.