CLARITY Act Revamp Targets Non-Decentralized DeFi Operators

A revised version of the CLARITY Act has emerged, targeting 'non-decentralized' DeFi operators in the United States. The bill aims to determine whether those controlling such protocols must comply with securities, commodities, and anti-money laundering (AML) requirements.

The revised text defines a non-decentralized protocol as one whose functionality, operation, or rules can be materially altered by a person or coordinated group. It also covers protocols whose controllers can restrict users or whose transactions are not governed solely by transparent, pre-established code.

Under the proposal, the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) would develop activity-based rules addressing registration, conduct, disclosure, recordkeeping, and supervision. Meanwhile, the Treasury would establish how existing Bank Secrecy Act obligations apply to affected controllers.

Crypto industry figures have expressed support for the bill, with Crypto Council for Innovation CEO Ji Hun Kim calling it a 'pivotal moment' for digital assets and innovation. Coinbase CEO Brian Armstrong also voiced optimism about the legislation's prospects, stating that the 'must-have issues' previously raised by Coinbase had been resolved.

However, some lawmakers have expressed concerns over ethics restrictions in the bill, with Democratic Senator Ruben Gallego warning against a fast vote until disputes are resolved. If the legislation does not advance, the SEC and CFTC could instead pursue rulemaking and innovation exemptions using their existing authority.