The Digital Asset Market Clarity Act was supposed to settle the question of who regulates cryptocurrency. It was a bill that would have defined different kinds of digital assets and assigned regulatory authority over them, elevating the Commodity Futures Trading Commission to new supervisory powers over crypto commodity spot markets. The legislation also included provisions meant to curb illicit finance and offer limited legal protections to DeFi software developers.
It died.
Now the SEC and CFTC are doing the work themselves. The agencies are pushing forward with a string of new rules, and the SEC’s Republican commissioners can move without Democratic approval. The shift is fast, and it is being watched closely by anyone building or trading in digital assets.
What the Clarity Act Was Supposed to Do
The Clarity Act was designed to bring clarity to a field that has been regulated by patchwork. Cryptocurrency has been treated as a security by some regulators and as a commodity by others. The bill was meant to end that confusion by defining the different kinds of digital assets and assigning responsibility to the right agency.
The Commodity Futures Trading Commission would have gained full supervisory powers over crypto commodity spot markets. That was the core of the bill, and it was meant to give the CFTC the authority it needed to oversee the markets that trade in these assets.
The legislation also addressed illicit finance. It included provisions meant to curb money laundering and other criminal activity tied to digital assets. For DeFi software developers, the bill offered limited legal protections, recognizing that developers often build open-source tools without intending to create financial instruments.
None of that became law.
The Failure That Set the Stage
The Clarity Act died, at least for now. Its failure leaves the industry without a clear legal framework. Instead, the SEC and CFTC are moving ahead with their own plans.
SEC Chairman Paul Atkins has repeatedly said his agency needed a law to back up its work and didn’t get one. He has pushed forward regardless, starting with a major policy initiative on tokenizing securities two days after the bill’s failure.
Atkins and CFTC Chairman Mike Selig had already embarked on a joint digital assets campaign with a taxonomy of how different assets would be treated. That campaign continues, but now it operates in a regulatory landscape shaped by the agencies themselves rather than by Congress.
“This is what you get when you don’t legislate.”
That line comes from Ian Katz, a Capital Alpha policy analyst, who wrote in a client note that Republican leadership at the agencies can pass regulations without Democratic approval. The SEC’s crypto rules are driven by an all-Republican commission with two Democratic vacancies left unfilled by the White House. The CFTC, where Selig is the sole current commissioner, has already sent a proposal on crypto transactions and markets for White House review.
The SEC’s Rules Are Already Coming
The SEC’s crypto rules are arriving fast. Last month, the agency pitched its first major rule on crypto, called Regulation Crypto Assets. It was a significant step toward formal regulation of the industry.
Last week, the SEC proposed a rule allowing blockchain data to serve as an official ownership record. That rule could reshape how ownership of digital assets is proven and recorded.
The SEC is also close to proposing a rule on how investment advisers should keep custody of digital assets. Together, these rules cover how assets are created, traded, stored, and proven. They give the SEC a firmer grip on an industry that has largely operated without one.
The CFTC Is Moving Too
The CFTC is not waiting for the SEC. The agency has already started on rules for prediction markets, which share features with crypto. On Friday, the CFTC sent a proposal on crypto transactions and markets for White House review.
The two agencies are working together, but they are also operating separately. The SEC’s rules apply to securities, while the CFTC’s rules apply to commodities.
Who Gets to Decide Now
The key difference between the Clarity Act and the current approach is who gets to decide. Congress writes laws. The SEC and CFTC write rules. The latter can move faster, but they are also more limited.
Katz’s warning is worth keeping in mind. When you don’t legislate, the agencies fill the gap. In this case, that means Republican-led agencies are setting the terms of the industry without Democratic input.
The White House has received the CFTC’s proposal. Its review could shape the final rule significantly. The SEC’s rules, meanwhile, are moving through the standard process.
What This Means for the Industry
The practical effect is that the industry now operates under a regulatory regime set by the agencies themselves. That means companies building or trading in digital assets need to understand what the SEC and CFTC are doing, not just what Congress might have done.
The rules will likely require changes to how companies store assets, prove ownership, and manage risk. Investment advisers will need to adjust their custody practices.
The lack of a single, unified law means the industry could end up with two separate sets of requirements. Companies operating across both securities and commodities may find themselves navigating two different regulatory regimes.
A Shift Into Overdrive
The shift into overdrive is real. The SEC and CFTC are moving quickly, and the Republican leadership at both agencies is pushing forward without waiting for a Democratic response. The result is a regulatory landscape that is changing faster than Congress could have moved.
The industry is watching closely. Companies are preparing for the new rules, even as they wait to see what the White House does with the CFTC proposal.
The path forward is unclear. The SEC’s rules are coming, and the CFTC’s rules are coming, but the interaction between them is not settled. The industry will have to navigate both.
The Paper’s View
Clay Tribune believes in a light touch on technology. New federal commandments should be few in number. The crypto industry should be allowed to operate without excessive oversight, so long as it does not harm people or the environment.
The paper supports small business and is wary of big government and big corporations alike. Regulation usually raises the cost of entry, making it harder for small players to compete. The paper opposes rules that protect the large players.
In this case, the agencies are moving ahead without a law behind them. The SEC’s Republican commissioners can act without Democratic approval. The CFTC’s sole commissioner has already sent a proposal for White House review.
The paper’s position is simple: let the industry operate, but watch it carefully. When a business directly harms people or the environment, regulate it. When it does not, leave it alone.
The SEC and CFTC are doing exactly that. They are regulating, but they are doing so on their own terms.
The Clarity Act was supposed to provide those terms. It failed. The agencies are now providing them themselves.
Where the paper stands
The paper backs the small crypto firm against the SEC and CFTC, and is against both agencies writing new rules on their own. The shift into overdrive is real, with the SEC’s Republican commissioners acting without Democratic approval and the CFTC’s sole commissioner sending proposals for White House review.
The paper opposes rules that raise the cost of entry for small players and protect the large ones. The agencies are moving fast, and they are doing so without a law behind them. That is a problem for the industry, which now faces two separate sets of requirements.
The paper supports small business and is wary of big government and big corporations alike. Regulation usually raises the cost of entry, making it harder for small players to compete. The paper opposes rules that protect the large players.
Source material: “Clarity Act, we hardly knew ye: We look at what was in the bill and what's replacing it,” CoinDesk.
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