CLARITY Act Seeks to Clarify Crypto Token Regulation in US

The CLARITY Act aims to clarify when a crypto token is considered an investment and when it's treated as a commodity. This distinction determines which regulator oversees the token, what information its creators must disclose, and what rules platforms must follow when listing or holding that token.

Currently, U.S. law lacks clear guidelines for tokens. The Securities and Exchange Commission (SEC) oversees securities, while the Commodity Futures Trading Commission (CFTC) has limited authority over commodity trading. Crypto assets often blur the lines between these categories.

The CLARITY Act would expand the CFTC's authority over spot Bitcoin trading, giving it broader power to regulate platforms where Bitcoin is bought and sold. For tokens like Ethereum and XRP, which exist in a grey area, CLARITY attempts to draw a line based on function rather than origin.

Platforms operating under the new CFTC framework would be required to register, keep customer assets segregated from their own funds, and follow rules covering disclosures, recordkeeping, and conflicts of interest. Projects raising money through token sales would need to publish information about who is behind the project and how the underlying technology works.