Clarity Act Fails, But SEC Grants Relief for Tokenized Stocks

The Senate's attempt to pass the Digital Asset Market Clarity Act (Clarity Act) has failed, with a cloture vote of 49-50. The bill aimed to provide clarity on regulatory requirements for digital asset service providers.

However, the SEC has issued an order granting temporary conditional exemptive relief to facilitate the trading of tokenized national market system stocks on blockchain-based venues. This exemption will allow certain liquidity providers to supply tokenized NMS stock to automated market makers without triggering broker-dealer registration requirements.

The CFTC has also issued a no-action letter extending relief to all passive software providers that develop front-end interface software for trading CFTC-regulated derivatives, including event contracts and perpetual contracts. These providers will not be required to register as introducing brokers or their personnel as associated persons if they satisfy certain conditions.

SEC Chairman Paul Atkins has announced plans to develop a proposal addressing crypto-custody questions under the Investment Advisers Act of 1940 and Investment Company Act of 1940, including whether an investment adviser may self-custody crypto assets for clients.