US lawmakers have introduced long-awaited market structure legislation in the form of the “Digital Asset Market Clarity Act of 2025” or “CLARITY Act of 2025”, for short. US Representative French Hill announced the bi-partisan market structure bill for digital assets on May 29, 2025.
The bill was drafted by the House Committee on Financial Services, who previously penned the FIT21 Act, which passed in the House of Representatives but ultimately failed to clear the Senate. The CLARITY Act follows months of hearings on the matter within the Subcommittee on Digital Assets, Financial Technology, and Artificial Intelligence.
The bill aims to remove longstanding ambiguity related to digital assets oversight by clarifying the roles of both the United States Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). While much can change from the point of introduction to the ultimate passage of legislation, a comprehensive framework like the CLARITY Act has the potential to reshape crypto regulation entirely by enabling clear pathways for institutional and retail adoption to scale in a legal and compliant way across the entire US market.
The bill gained momentum following a June 4th House Committee hearing titled "American Innovation and the Future of Digital Assets: From Blueprint to a Functional Framework," where industry experts and former regulators debated the legislation's merits and challenges.
“How decentralized is it?” is the new “Is it a security?”
One of the principal innovations of the proposed legislation is that instead of asking "Is crypto a security?" the CLARITY Act asks “How decentralized is this system?”. This is key because the level of decentralization would ultimately determine jurisdiction underneath either the SEC (for early-stage tokens with centralized control designated as "Investment Contract Assets."), or the CFTC (for more mature and fully decentralized blockchain network tokens designated as "Digital Commodities.")
In other words: As assets become more decentralized, they transition from SEC to CFTC jurisdiction.
Stablecoins are singled out
The emergence of stablecoins as crypto’s killer use case warrants special consideration, as we can see recognized by the creation of a third tier of assets called Permitted Payment Stablecoins. This class of digital asset is subject to light regulation due to the asset being adopted widely by consumers warranting some level of protection.
This creates a three-tier framework for digital asset regulation:
TradFi players can get in the game
One of the biggest unlocks of such a comprehensive market structure bill is a regulatory framework for traditional finance players to get into the crypto game without exposing themselves to unnecessary regulatory and compliance risk.
Under the proposed CLARITY Act, banks would be able to custody crypto without balance sheet liability, as well as trade more complex crypto financial instruments.
Clear pathway for crypto-native companies
The bill provides concrete guidance for crypto companies that have been operating in regulatory limbo. Key provisions include:
- $75 million fundraising exemption with a 4-year maturity timeline
- Founder trading restrictions until networks reach maturity
- Provisional registration pathways allowing companies to operate while agencies develop detailed regulations
For VASPs already operating in our compliance network, these provisions validate the approach we've been advocating for: building robust compliance frameworks from day one, even when regulations are still evolving.
DeFi is clearly addressed
Decentralized finance protocols receive explicit recognition and protection under the CLARITY Act. The bill includes self-custody rights and anti-fraud enforcement while acknowledging that truly decentralized protocols operate differently from traditional financial entities. This recognition is crucial for the DeFi ecosystem's maturation and integration with traditional finance systems.
Hearing insights
Support and skepticism
During the June 4th hearing, we saw both strong support and pointed criticism:
Former SEC Commissioner Elad Roisman called the bill a "significant step forward to providing the needed clarity" to digital markets.
Former CFTC Chairman Rostin Behnam agreed that current federal law has left regulatory gaps, urging Congress to address this void with "targeted legislation."
However, former CFTC Chairman Timothy Massad raised significant concerns, particularly around anti-money laundering provisions. When directly asked if the bill addresses AML adequately, Massad responded "not sufficiently," pointing to critical gaps:
- The bill only applies Bank Secrecy Act requirements to centralized intermediaries
- Crypto assets can be transferred without going through intermediaries, creating enforcement gaps
- Treasury needs more authority over decentralized protocols and foreign platforms
- Stablecoin issuers should be required to monitor suspicious wallet activity
"We've got to give the Treasury Department and other regulators adequate tools to deal with those risks. And I don't think we've done that yet," Massad emphasized, citing examples of Russian smugglers using Tether and Hamas using crypto funding.
The AML challenge: Where traditional frameworks meet DeFi
One of the most contentious aspects of the June 4th hearing centered on anti-money laundering provisions. Democratic members pressed witnesses on whether the CLARITY Act provides adequate safeguards against illicit finance, particularly in decentralized systems.
The Core Challenge: Traditional AML frameworks rely on intermediaries like banks to monitor and report suspicious activity. DeFi protocols, by design, operate without centralized intermediaries, creating what critics see as regulatory blind spots.
Representative Lynch directly asked: "Does this bill address anti-money laundering adequately?" The responses revealed a fundamental split in thinking about crypto compliance.
Industry Perspective: UniSwap's Katherine Minarik argued that blockchain analytics provide superior tools for tracking illicit activity in real-time, claiming traditional BSA requirements are "broken and in many ways dying." She emphasized that sanctions screening requirements still apply to all US companies, and blockchain's transparency offers better visibility than traditional finance.
Regulatory Skepticism: Former regulators expressed doubt that existing frameworks adequately address decentralized systems. The concern isn't just about tracking funds after the fact, it's about preventing illicit activity before it happens.
For institutions operating in our compliance network, this debate highlights why robust Travel Rule implementation is crucial. While regulatory frameworks evolve, institutions with comprehensive compliance programs, including pre-transaction screening and counterparty verification, position themselves ahead of whatever requirements emerge.
Balanced priorities: Innovation, consumer protection, and law enforcement
The CLARITY Act aims to achieve a critical balance of three important priorities:
- Market Innovation: Providing clear pathways for crypto-native businesses to grow and thrive
- Consumer Protection: Establishing safeguards without stifling legitimate innovation
- Law Enforcement Authority: Ensuring regulators have tools to combat illicit activity
However, the hearing revealed this balance remains contentious. Critics argue the bill creates enforcement gaps in DeFi, while supporters contend it improves on the status quo by bringing centralized crypto activities under Bank Secrecy Act coverage.
A critical week ahead: June 10 committee markups
The CLARITY Act faces a pivotal moment on June 10, when both the House Financial Services Committee and House Agriculture Committee are scheduled to hold markups of the legislation. This dual committee approach reflects the bill's comprehensive scope where the Financial Services handling securities and market structure issues, while Agriculture addresses commodity futures aspects.
These markups represent the first major procedural hurdle for the legislation. Success in both committees would provide significant momentum for floor votes and eventual Senate consideration.
What to expect next
While the June 10 markups represent crucial first steps, this is only the beginning of the CLARITY Act's legislative journey. With many procedural hurdles ahead, expect the bill's contents to evolve as it moves through Congress. The June 4th hearing revealed both strong bipartisan support and areas where compromise will be necessary. Expect to see the contents of the bill change shape as it makes its way through Congress, as the finer details and subsequent implementation of the bill will be critical for its long-term potential to reshape the industry in a positive way.
For years, the US crypto industry has bemoaned the lack of clarity from regulators and displayed an appetite for following the rules if only they existed. This is our collective chance to put those rules in place for an important market in the global crypto economy, and provide the long-awaited opportunity for American crypto companies to remain competitive while ensuring that the regulatory clarity also allows international crypto firms to tap into the growing US market.
The bill's success could provide the long awaited opportunity for American crypto companies to remain competitive while ensuring regulatory clarity allows international firms to tap into the growing US market with confidence.
For institutions already building compliant crypto operations, the CLARITY Act validates the approach of implementing robust compliance frameworks before they're required. Those who've invested in comprehensive Travel Rule compliance, counterparty due diligence, and risk management systems will find themselves ahead of the curve as these requirements become standardized.
At Notabene, we've been building the infrastructure that will support this regulatory future. Our open-loop Transaction Authorization Protocol (TAP) and comprehensive compliance platform are designed for exactly the kind of regulated, interoperable crypto ecosystem that the CLARITY Act envisions.
The CLARITY Act isn't just about providing regulatory certainty, it's about building the foundation for crypto's integration into the broader financial system. For institutions ready to operate in this environment, the opportunity is enormous.
