CLARITY Act Explained: What the Senate Vote Means for Crypto

The crypto market structure bill, or CLARITY Act, continues to face challenges from opposition and parties seeking to ensure it includes aspects vital to their business models. Recently, the bill passed the House and is preparing for a Senate vote. As such, it’s the perfect time to delve into what it encompasses and how it could affect the market moving forward. Here is everything you need to know about the CLARITY Act.

Why Crypto Market Structure Regulation Is Long Overdue

The CLARITY Act was born from a growing sense of urgency regarding the regulation of digital assets like Bitcoin, DeFi tokens, and stablecoins. Since their inception, digital assets have lacked a clear method for determining asset classes or identifying which regulatory body would be responsible for enforcement.

In the early days of the blockchain market, this looseness was acceptable because the majority of investors were seeking to innovate the technology and drive adoption. Today, the market has grown into a trillion-dollar sector with institutional funding pouring in by the billions.

Notably, institutional investors have higher standards that require legal certainty. This requirement means that the current level of participation is just a drop in the bucket compared to the potential that could be achieved with true clarity. Additionally, the lack of transparency has led to a scenario in which many blockchain projects fear rule by enforcement, meaning they must “wait and see” rather than build with confidence.

What Is the CLARITY Act (H.R. 3633)?

The Digital Asset Market Clarity Act of 2025 (H.R. 3633) is an attempt to rectify these issues. It contains components derived from regulators, market participants, and everyday crypto users. It was devised with the express goal of easing institutional investor concerns without stifling U.S. innovation.

The bill successfully passed the House on July 17, 2025, after months of debate and negotiations. Now it will come before the Senate, where it promises to be an even bigger battle. Here is what the bill currently contains and why some believe it needs to include much more.

Federal Framework

At the core of the CLARITY Act is a new framework that places distinct responsibilities on the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). The new guidelines will enable companies to expedite their registration and improve investor confidence.

Key components of the bill include full compliance with the Bank Secrecy Act. It also introduces several guidelines for digital asset custodians, including the need to separate funding from operational cash flow, provide third-party auditing, and institute several enterprise-level risk controls.

Specifically, state or federal banks, trust firms, and CFTC-registered companies will be able to act as custodians if the legislation passes. Companies that don’t fall under these guidelines will need to integrate a certified custodian into their business model, alongside new non-controlling developer protections, to meet compliance.

Oversight

The SEC and the CFTC will have separate responsibilities in this framework. However, a key aspect of the bill is that new definitions, rulings, and future guidelines will be decided by a joint committee containing representatives from both agencies. In terms of specific tasks, the SEC will be responsible for monitoring centralized tokens and investment contract assets.

Conversely, the CFTC will monitor the spot markets, exchanges, brokers, and dealers. Their jurisdiction will include DeFi and other decentralized digital commodities. The bill describes a digital commodity as an asset associated with a mature blockchain system without a single controlling entity.

Technically, stablecoins could also fall under this classification. However, the CLARITY Act defers to the guidelines in the GENIUS Act. The Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025, or GENIUS Act, was signed into law on July 18, 2025. It lays out a comprehensive framework for the stablecoin sector, establishing vital standards for issuing, storing, and utilizing stablecoins.

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Why the CLARITY Act Prohibits Stablecoin Yields

Interestingly, the CLARITY Act exempts payment stablecoins from securities laws in its current form. This topic was already covered in the GENIUS Act, which prohibits the action. Many believe this maneuver was designed to make a clear distinction between bank deposits and stablecoins to help prevent massive capital outflows from the traditional banking system.

Exclusions

The CLARITY Act includes several other exclusions. Primarily, it exempts secondary trades of mature digital commodities. It also exempts secondary markets like CEXs and DEXs from the need to register with the SEC. This decision is seen as a positive for the sector as it helps to expedite new projects.

Did the CLARITY Act Influence Bitcoin’s Post-Rate-Cut Performance?

Some analysts were quick to connect the bill’s movement to the Senate as one of the reasons Bitcoin (BTC +0.02%) didn’t see the rally many had hoped for following the Fed rate cut. However, a deep analysis shows that market sentiment remains cautious, and many investors view the rate cut as a trial rather than a definitive remedy.

Legislative Status and Senate Outlook

It has been months since the CLARITY Act passed the House. Now the bill will go to the Senate for a final vote. Notably, it has picked up bipartisan support, with many seeking to push the legislation through before the end of 2025. However, new distractions and options could muddy these efforts.

Political Friction and Competing Senate Proposals

The Senate Banking Committee has delivered draft legislation that is seen by many as direct competition to the House bill. This new legislative effort follows weeks of tight-lipped negotiations between Senate Democrats and Republicans.

Notably, Democrats have shown support for much of the CLARITY Act’s structure. However, they feel it falls short on crucial aspects including stability, market integrity, and national security. They also want a section that specifically focuses on political conduct regarding these assets.

This last request is clearly geared toward President Trump, who has launched several blockchain projects over the last few years. Notably, Trump has made a full turnaround regarding digital assets, which he labeled as a “scheme” during his first term.

Embracing New Tech

This latest legislation is part of a broader maneuver to embrace blockchain and other advanced technologies. Already, SEC Chair Paul Atkins has stated that the market is seeking to transition toward on-chain entities. As part of this maneuver, the SEC responded with a no-action letter regarding plans by the Depository Trust and Clearing Corporation (DTCC) to launch a new securities market tokenization service.

Full Tokenization

Financial markets are making their way to a blockchain near you, and for good reason. Blockchain-based systems reduce costs, improve transparency, and are more resilient than centralized options. Also, as more legislation provides digital assets with key protections found in traditional markets, the transition makes more sense than ever.

This shift toward digital is expected to enhance performance, improve transparency, and provide more stability. It will also inspire more tech firms to begin offering innovative products to assist in the on-chain transition. The SEC went as far as to state it will be considering more exemptions regarding transition offerings.

Atkins has been vocal about his support for integrating innovative tech to improve and enhance offerings. This latest decision to enable one of the nation’s largest clearing, settlement, and trading service providers to operate freely speaks volumes and will surely inspire more innovation.

The CLARITY Act | Conclusion

It would be an amazing accomplishment if lawmakers could come together and get this legislation passed before the end of 2025. However, the chances of bipartisan support reaching a level to make this possible are dwindling by the hour. It is more realistic that the bill will come before the Senate following the holiday break, giving both sides more time to refine their stance.

What do you think about the CLARITY Act? Do you think it will pass before the end of 2025? Like, share, and let us know in the comments. Click here for more digital asset developments.