U.S. House Committees Advance CLARITY Act in Push to Modernize Crypto Rules

The CLARITY Act builds upon the groundwork laid by the Financial Innovation and Technology for the 21st Century Act (FIT21), which passed the full House in May 2024. While FIT21 focused primarily on splitting regulatory oversight between the CFTC and SEC, the new CLARITY Act incorporates broader definitions, enhanced registration mechanisms, and stronger protections for decentralized finance protocols and digital asset developers.

At its core, the CLARITY Act introduces a regulatory framework that defines when a digital asset should be considered a security versus a commodity. This distinction determines which federal agency will have jurisdiction: the SEC for securities, and the CFTC for commodities. Assets meeting criteria for decentralization or utility functionality will be treated as "digital commodities" and overseen by the CFTC.

One of the key additions in the CLARITY Act is the creation of a provisional registration regime for digital asset exchanges. This regime allows platforms to operate legally under CFTC oversight while working toward full compliance. The bill also introduces safe harbor protections for developers of decentralized protocols, limiting their liability when the protocols are sufficiently decentralized and no longer under the control of a single party.

While the House Agriculture Committee has now formally advanced the CLARITY Act, its path through the House Financial Services Committee — which oversees the SEC — has been more contentious. Democratic members of that committee, led by Ranking Member Rep. Maxine Waters (D-CA), expressed reservations about narrowing the SEC’s role in crypto oversight.

Waters voiced concerns that the legislation could expose investors to risk and enable regulatory loopholes for crypto firms that have historically operated with minimal transparency.

Some Democrats have also criticized the political timing of the bill, pointing out its alignment with the broader pro-crypto stance of President Donald Trump’s administration. Trump has recently championed crypto policy reforms and publicly supported regulatory changes that would limit SEC enforcement in the digital asset space.

Crypto industry leaders have responded positively to the CLARITY Act, saying it brings clarity and legitimacy to a space long plagued by legal uncertainty.

The bill also includes provisions to preempt certain state-level securities laws that conflict with federal treatment of qualifying digital commodities. That change has been especially welcomed by exchanges and token issuers who have struggled with the patchwork of regulatory interpretations across U.S. states.

The CLARITY Act’s progress comes at a time of heightened legislative activity around digital assets. In the Senate, Majority Whip John Thune (R-SD) is spearheading a separate bill focused on stablecoin regulation — the GENIUS Act — which has received backing from the White House and is expected to face a procedural vote later this week.

These parallel efforts suggest that momentum is building on both sides of Congress to establish comprehensive frameworks for cryptocurrencies, stablecoins, and blockchain-based financial infrastructure.

The CLARITY Act now awaits full House debate, where it is likely to pass given the broad bipartisan support it received in the Agriculture Committee. If approved, the bill will move to the Senate for further consideration, though it remains unclear whether the Senate Banking Committee will prioritize it before the August recess.

If enacted, the CLARITY Act would significantly reshape how the federal government interacts with digital assets — ending years of regulatory ambiguity and inconsistent enforcement.

The advancement of the CLARITY Act marks a new chapter in the U.S. government’s approach to digital assets. Building on the foundation set by FIT21, it moves beyond classification issues to establish a regulatory framework suited for a maturing crypto economy.

As blockchain innovation accelerates globally, the question is no longer whether the U.S. will regulate crypto — but how. And with the CLARITY Act, lawmakers may finally be providing an answer.