CLARITY Act Seeks to Clarify Cryptocurrency Regulation in US

The CLARITY Act is a proposed US law aimed at clarifying the regulatory status of cryptocurrencies like Bitcoin, Ethereum, and XRP. The bill seeks to establish clear rules for when a crypto token counts as an investment or commodity.

Current US law lacks clarity on this matter, leaving regulators uncertain about which tokens fall under SEC (Securities and Exchange Commission) or CFTC (Commodity Futures Trading Commission) oversight. This has led to a gray area where some tokens are treated as securities while others are considered commodities.

The CLARITY Act attempts to draw a line based on function rather than origin, allowing tokens to transition out of securities treatment once they no longer depend primarily on a central team.

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.

The bill has faced opposition due to disagreements over what those rules should say and who should enforce them. Lawmakers have reached a compromise on stablecoin rewards and state authority, but conflicts of interest among lawmakers remain a contentious issue.