CLARITY Act Seeks to Clarify Digital Asset Regulations

The Digital Asset Market Clarity Act (CLARITY) proposes to bring much-needed certainty to banks by codifying anti-money-laundering responsibilities for digital asset firms. This would help close the gap between banks and crypto companies, which have been nervous about counterparty risk due to unclear regulatory requirements.

Currently, Fincen provides interpretive guidance on how existing Bank Secrecy Act (BSA) rules apply to crypto firms. However, this is not as durable as statutory requirements and can cause uncertainty for banks.

CLARITY would enshrine statutory requirements for digital asset firms, including maintaining AML programs, retaining transaction records, monitoring suspicious activity, and conducting customer due diligence. This would provide a clearer baseline for banks to assess counterparty risk.

While CLARITY addresses some issues, it doesn't solve everything. DeFi protocols and self-custody wallets raise different challenges that require special attention from banks.