U.S. House Advances Bill on Digital Asset Market Regulation Framework

The U.S. House of Representatives recently passed an important new "market structure" bill—the "Digital Asset Market CLARITY Act"—with an overwhelming majority. This bill aims to establish a clear regulatory framework for the digital asset market and has now entered the Senate review stage.

If approved, the bill will establish clear rules for blockchain systems, ending years of regulatory uncertainty that has hindered innovation and harmed consumer interests. Similar to the 1933 Securities Act which promoted a century of capital formation in the United States, the CLARITY Act is expected to become a significant piece of legislation for the era.

The bill has been improved in several key areas:

1. Create a clear regulatory path for digital assets. The bill establishes a control-based maturity framework, allowing blockchain projects to launch digital assets and enter the public market without bearing excessive regulatory burdens.

2. Implement supervision over blockchain-based intermediaries. Require centralized entities such as exchanges to register with regulatory authorities and comply with compliance standards similar to those of traditional financial institutions.

3. Implement strong measures to protect consumers while promoting innovation. Require issuers of digital assets to fulfill mandatory disclosure obligations and restrict insider trading, among other things.

4. Provide a clear path for the transition of regulatory authority over digital assets from the SEC to the CFTC.

The maturity framework of the bill adopts objective and measurable standards, focusing on who controls the underlying blockchain system and its digital assets. This helps legitimate developers to thrive while making it more difficult for bad actors to exploit legal ambiguities.

The bill provides important protections for DeFi. It exempts DeFi protocols from the regulatory requirements imposed on intermediaries, establishes standards for DeFi, and provides legal clarity for projects.

Overall, the CLARITY Act improves the current lack of regulation, transparency, and protection, setting standards for the industry. It draws lessons from the previous FIT21 Act, with improvements in areas such as transparency, consumer protection, and maturity frameworks.

This bill complements the recently passed "GENIUS Act". As the "GENIUS Act" accelerates the adoption of stablecoins, the "CLARITY Act" will provide the necessary standards and oversight for the underlying infrastructure supporting stablecoins.

The bill has now entered the Senate review stage. It is expected that the Senate may propose its own version, and both chambers need to reconcile differences before it can be finally passed. Key leaders have set a goal to send the market structure bill to the President for signing by the end of September.