CLARITY Act Cryptocurrency Bill Hits Roadblock in Congress

The CLARITY Act, a bill aimed at establishing a regulatory structure for cryptocurrency and digital assets, has stalled in Congress. The bill defines a digital asset as 'any digital representation of value which is recorded on a cryptographically-secured distributed ledger or other similar technology.' This includes Blockchain-based cryptocurrencies, stablecoins, and other technologies meant to be used as money or investments.

The bill aims to establish rules governing how digital assets are issued, traded, intermediated, and supervised across the U.S. financial system. However, a major point of contention is how to divide oversight between the Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC). The current version of the bill gives the CFTC more power than the SEC, but classification would depend on the asset's legal rights, offering structure, network development, issuer involvement, and the activity being regulated.

The bill also includes a change to an existing law that would allow for criminal prosecutions related to blockchain issues. Specifically, a key change would no longer explicitly shield decentralized finance developers from 18 USC 1960, the part of the federal criminal code that prohibits unlicensed money transmission. The liability protections are now civil, rather than criminal.