CLARITY Act Shifts Focus to DeFi Controllers in Revised Bill

A revised version of the CLARITY Act has emerged, with key changes aimed at clarifying regulatory obligations for decentralized finance (DeFi) trading protocols. The bill now focuses on controllers rather than protocols in the abstract, drawing a line between those that behave like neutral infrastructure and those where an identifiable controller retains control.

The revised act defines non-decentralized protocols as ones whose functionality can be altered by an identifiable person or group. This shift means the SEC and CFTC will write activity-based rules for controllers regarding registration, conduct, disclosure, recordkeeping, and supervision.

Treasury would then determine how existing Bank Secrecy Act obligations apply to affected controllers. Software and distributed-ledger systems are exempt from registering in their own capacity under the revised act.