Clarity Act crypto bill: Key facts, goals, what happens next

The U.S. Senate is set to vote Tuesday, September 15, on whether to advance the Digital Asset Market Clarity Act. This marks a landmark bill that would create the first comprehensive regulatory framework for cryptocurrencies and digital assets in U.S. history.

Presently, crypto businesses claim they are unable to understand which laws apply to them, and this proposed law will allocate jurisdiction over this industry among two government agencies: the SEC and the CFTC, and determine what digital assets will be considered securities and what will be considered commodities. The law will also require that the money of customers should not be used by crypto businesses and will protect those who develop decentralized finance applications. Additionally, the bill contains an ethical requirement for elected representatives and their families not to create their own cryptocurrency and invest large sums in crypto. 

Key facts

The Clarity Act is a 600-page piece of legislation which has been on the crypto industry’s priority list for several years already. Last year, a version of the act was approved in the House; however, in the Senate, the bill has a long path ahead because it requires 60 votes for procedural approval. Republicans have 53 seats in the Senate; thus, at least seven Democrats or independents have to support the bill.

Sticking points

The Democrats contend that the provisions related to ethics do not go far enough towards making it harder for officeholders to make money on cryptocurrencies, citing the $1.4 billion in crypto profits made by President Trump. The new Republican language prohibits officials and their spouses from issuing their own cryptocurrencies and divesting significant interests. The community banks are also against the legislation, as they are concerned about the potential loss of deposits to local banks.

What’s next

While the procedural vote clears the way for debate, it needs to undergo floor debate and reconciliation, because the Senate bill is different from that in the House. With midterm elections around the corner, there is little time for Republicans to resurrect the bill, should it fail Tuesday's procedural vote. The market seems to have already priced in the possibility of failure of the bill, although its passage would provide much-needed legal clarity.