The Senate’s CLARITY Act attempted to establish a long-overdue regulatory framework for digital assets. Although it failed to attract the necessary votes this time, I suspect this will arise again (and again). In general, the CLARITY Act is a pretty good piece of legislation, regardless of your political leanings. It effectively establishes a durable regulatory framework for digital assets. I do think it could go a bit further to protect investors. Primary oversight should rest with one regulator rather than being divided between the SEC and CFTC, which could create confusion and inconsistent standards. The SEC has the experience and investor-protection mandate to serve as the primary regulator. With clear rules and expectations (and not regulation through enforcement) the industry can adapt to meaningful oversight.
I also strongly support the bill’s ethics provisions prohibiting public officials from issuing or sponsoring digital assets. These restrictions should reduce conflicts of interest, increase transparency, and give the industry greater credibility. Finally, the legislation should close the loophole that prohibits stablecoin issuers from paying interest directly to holders while permitting exchanges and wallet providers to offer similar returns or rewards.
The industry needs clear rules and transparency to earn the confidence of the broader investing public and move beyond its reputation as a murky niche market.
The prior reliance on ‘regulation through enforcement’ was a poor way to promote innovation or create a meaningful regulatory structure. Legislation provides greater durability, gives the industry a clearer path to operate in the U.S., and could reduce incentives to move offshore. However, significant concerns remain -- divided jurisdiction between the SEC and CFTC, uncertainty about the CFTC’s capacity to provide meaningful oversight, and the continued need for stronger investor protections and education as digital assets attract greater retail participation.
The CLARITY Act may be stalled for now, but I expect the call for crypto regulation to continue. This would be a good place to start.
Frank Ingraham is Founder & Principal of Gryphon Compliance Services. He can be reached at fingraham@gryphon-compliance.com
