Against the backdrop of the long-standing regulatory fog in the US encryption industry, the implementation of the CLARITY Act has finally broken the absurd dilemma of "no rules to follow and post accountability". Last Wednesday, the US Senate Banking Committee passed this highly anticipated bill with 15 votes in favor and 9 votes against. Senator Elizabeth Warren stated that it "completely breaks through the securities law system established since 1929". Although it has exaggerated elements, it also reveals the breakthrough significance of the bill: it provides a feasible judgment standard for the regulatory qualification of tokens for the first time, and builds the first complete digital asset regulatory system in the United States. However, at the same time, the hidden thresholds and loopholes behind it also bring new challenges to the cryptocurrency industry, especially the degree of decentralization of tokens, and puts forward strict testing requirements.

Prior to this, the regulatory environment in the US cryptocurrency industry was chaotic: if ten lawyers were asked whether Ethereum is a security or a commodity, they could receive twelve different answers and ultimately incur high consulting fees. During Gary Gensler's tenure at the SEC, the agency initiated 88 enforcement actions against cryptocurrency projects, of which 92% were due to "incomplete registration" violations - many companies were punished simply for failing to complete compliant registration according to regulatory frameworks that have never been clearly defined. This "punishment first, regulation later" model has left industry companies helpless, and many institutions can only choose to withdraw from the US market to avoid compliance risks.

Core breakthrough of the bill: Token regulation has a clear path for qualitative analysis, and decentralization is a key threshold

The core change of the CLARITY Act is the establishment of clear and implementable judgment rules and conversion paths for the industry's core controversy of whether tokens belong to securities or commodities, ending the long-standing regulatory ambiguity.

The bill clearly stipulates that all tokens are classified as securities by default in the initial stage. As long as the project party raises funds through the sale of tokens and promises to use the funds to carry out project construction, it constitutes an investment contract under the definition of the Hoy Act and is directly included in the scope of SEC supervision - this rule is not a new regulation and has existed since the rise of the fundraising model in the cryptocurrency industry. The core breakthrough is that the project party now has a clear path for compliance and classification.

The bill officially establishes the "Mature Blockchain Judgment Criteria": If a public chain meets the three major conditions of "open source operation, operation based on established transparent rules, and no individual or single group holding more than 20% of the total token supply", the project can submit an application to the SEC to prove that it has reached sufficient decentralization standards and is subject to review. If the SEC does not raise any objections within 60 days, the token will be reclassified as a digital commodity and regulatory jurisdiction will be transferred from the SEC to the U.S. Commodity Futures Trading Commission (CFTC).

The transfer of jurisdiction is of great significance to the project. The SEC equates tokens with stock regulation, requiring complete registration, detailed information disclosure, and continuous financial reporting, which incurs high compliance costs; The CFTC, on the other hand, regards tokens as commodities such as crude oil and wheat, with a more relaxed regulatory framework. Its core responsibility is to maintain market fairness, rather than restricting market participants. This means that projects that pass decentralized audits will significantly reduce daily compliance operating costs.

At the same time, the bill provides a four-year transition period for the project to complete its decentralized transformation: teams can submit a statement to the SEC stating their plan to achieve mature blockchain standards within four years, and as long as the decentralization construction is steadily promoted, they can enjoy temporary regulatory exemptions; But if the four-year deadline is not met, the exemption qualification will be immediately cancelled, and the project will be reclassified under the full scope of securities law regulation, with stricter information disclosure requirements than the initial stage.

With the implementation of the GENIUS Act in 2025, the United States has established a complete digital asset regulatory system for the first time: stablecoins have clear regulations on reserve assets, operating licenses, and issuing entities; Various types of tokens are regulated by the SEC or CFTC based on the core threshold of "20% token holding concentration". And this system is profoundly changing the survival pattern of existing and newly issued token projects.

Industry differentiation under decentralized testing: grassroots projects no longer have room for survival

The decentralization criteria of the CLARITY Act have directly led to significant differentiation in the industry: top mainstream cryptocurrency assets easily pass the review, while small and medium-sized projects and grassroots teams are in a desperate situation.

There is no single entity holding nearly 20% of Bitcoin, and it has been recognized as a commodity for many years; After the merger of Ethereum, there are now over 1.07 million verification nodes, making it the most dispersed ecosystem in terms of infrastructure distribution among all smart contract public chains. In March 2026, the SEC and CFTC jointly issued an interpretation announcement, officially designating 18 tokens including Bitcoin, Ethereum, Solana, XRP, Cardano, Chainlink, Avalanche, etc. as digital commodities. Investors holding such assets do not need to worry about regulatory qualification issues.

However, there are still hidden dangers in this interpretation announcement: it is essentially an official interpretation of the current law by two regulatory agencies, with market influence but no formal legislative effect. The next SEC chairman can directly issue a new interpretation document, which can overturn the commodity classification of Solana and other tokens overnight without congressional review and voting, putting them back into a regulatory gray area.

Start up teams that have not yet issued tokens face even more severe challenges. According to the bill, all newly issued tokens are automatically classified as securities from their inception. To break free from SEC supervision and be reclassified as commodities, it is not only necessary to submit disclosure materials, legal documents, and semi annual operational reports to the SEC over the years, but also to steadily achieve decentralized maturity standards. Previously, the Hiro Systems project attempted to complete the SEC's current full registration process, with expenses for compliance operations and legal rights alone exceeding $15 million, even exceeding its total fundraising amount.

Although the bill stipulates that the project can enjoy a maximum exemption of $50 million in total fundraising during the transition period of ecological maturity, the complete compliance system required to adapt to this exemption policy is costly, and in reality, only mature project teams holding venture capital funds and hiring dedicated law firms can afford it. This means that small entrepreneurial teams lacking institutional capital support are almost unable to pass this set of review standards. The grassroots issuance model of Ethereum in 2014, which involved public participation, community led initiatives, fundraising of $18 million without regulatory intervention, has become illegal under the framework of the CLARITY Act and has completely exited the historical stage.

Hidden vulnerabilities: DeFi safe harbor terms almost failed, compliance risks still exist

Compared to the qualitative regulation of tokens, the safe harbor provisions established for DeFi developers in Articles 309 and 409 of the CLARITY Act are actually more meaningful to the industry - they should have been the "umbrella" of the DeFi industry, but due to loopholes in the provisions, they almost lost their actual value.

This clause clearly stipulates that the entities that write smart contract code, run verification nodes, and develop self managed wallets do not belong to financial intermediaries, do not need to register broker qualifications, and are not recognized as currency transfer service providers. Regulatory authorities shall not hold them accountable in this capacity. The principle that "code itself is not equivalent to asset custody" was officially written into the bill, and the birth of this benefit originated from the Roman Storm case.

Storm developed Tornado Cash, an Ethereum ecosystem privacy mixing tool. He does not manage any user funds and cannot freeze or reverse transactions. Even if he subjectively wishes, he has no right to shut down the protocol. The project code is open source and runs independently. But the US government still convicted him in August 2025 on the grounds of "operating currency transfer business without a license", mainly because it was unable to clearly distinguish between "software development behavior" and "currency transfer business behavior" in legal terms at that time.

However, there are still significant loopholes in this safe harbor clause. During the committee voting stage, a temporary amendment amended the wording of the article to specify the circumstances in which developers no longer enjoy safe harbor protection: if the actor substantially controls the operation of the agreement through agreement, cooperation arrangement, or private consensus, they will no longer receive compliance protection. This means that in DeFi protocols such as Aave and Compound, token holders who participate in ecological upgrade proposals and treasury fund decision-making voting on a daily basis are easily identified as having reached a "cooperative arrangement", which in turn leads to practitioners who rely on such protocols to carry out development business directly losing their compliance protection qualifications.

More importantly, the safe harbor only provides support for the backend underlying architecture, smart contracts, verification nodes, and node operators, without defining any front-end interaction interface. Ordinary users rarely directly call the original smart contract to operate DeFi, and mostly rely on official web front-end platforms such as Uniswap and Aave for trading. Once the regulatory authorities determine that operating such front-end pages constitutes "conducting financial service business", the safe harbor can only protect the underlying code, but cannot cover the application products actually used by users - this may become the trigger for the next major regulatory game in the DeFi field.

Jake Chervinsky, head of the Hyperliquid Policy Center, bluntly stated, "If this bill cannot adapt to the decentralized financial ecosystem, it will lose its meaning." In fact, if the existing provisions are not modified, the safe harbor clause can only protect the rights of developers on paper, and there are still huge compliance risks hidden in practical implementation scenarios.

It is worth mentioning that Warren proposed to add an amendment to give the US Treasury Department the authority to sanction DeFi protocols, replicating the regulatory measures that banned Tornado Cash in 2022. The amendment was ultimately not passed with 11 votes in favor and 13 votes against, and all Republican lawmakers voted against it. At present, there is still no clear legal conclusion on whether the regulatory authorities can impose sanctions on open source software without actual control entities in accordance with the law. This dispute will eventually lead to judicial proceedings, and the voting result of this amendment will become an important legal basis for industry rights protection.

Reshaping the pattern of interests: winners emerge, industries move towards standardization but with hidden biases

The implementation of the CLARITY Act not only solves the problem of regulatory qualification, but also reshapes the interests of the cryptocurrency industry, with the biggest beneficiaries being traditional banking institutions and top cryptocurrency platforms.

The bill officially abolishes the SAB 121 accounting standard and the previous mandatory requirement for financial institutions to include customer encrypted assets in their own balance sheet liabilities. This accounting standard is the core barrier that has long hindered traditional banks from entering the field of encrypted asset custody. Nowadays, major mainstream financial institutions are allowed to hold assets such as Bitcoin and Ethereum in compliance without disrupting their capital adequacy indicators; Institutional level custody platforms such as BitGo and Anchorage have finally broken free from the limitations of simple asset storage business and are able to rely on comprehensive legal basis to officially lay out advanced financial services such as institutional brokerage and clearing.

The asset tokenization track is also facing significant opportunities. The industry's estimated range for the size of the tokenized asset market in the 2030s is between 2 trillion and 30 trillion US dollars. Previously, the trillion dollar market size could not be realized due to the lack of compliant trading channels. The CLARITY Act completely cleared this obstacle, built a legal bridge connecting traditional institutional capital with on chain asset markets, and broke down the core barriers to capital entry.

More noteworthy is the linkage effect between the CLARITY Act and the GENIUS Act, which has triggered a capital migration in the cryptocurrency market. The GENIUS Act explicitly prohibits stablecoins from relying on holdings to obtain passive returns. Investors can no longer simply deposit USDC on exchanges and wait for 5% annualized returns. To earn returns, they must actively participate in the ecosystem, such as pledging tokens, participating in on chain governance, or providing liquidity. This rule has led to the influx of hundreds of billions of previously idle funds into standardized DeFi protocols such as Pendle, Morpho, Maple Finance, and others. Legislators did not intend to push for large-scale capital flows to DeFi, but unexpectedly facilitated this capital restructuring.

It cannot be denied that compared to the regulatory chaos of the past decade, the CLARITY Act has made significant progress, ending the absurd model of "regulation relying on litigation" and providing clear compliance guidelines for the industry. However, at the same time, this bill also reflects the interests of established industry giants: high compliance costs, a four-year transition period for ecological maturity, a complete legal system required to enjoy regulatory exemptions, and various thresholds are more inclined towards mature projects with strong funds and professional legal teams. For top platforms like Coinbase, this regulatory framework is the ideal rule they have been seeking for a long time; But for emerging start-up projects in the industry, the relevant terms have been finalized before they enter the market and have no say.

The CLARITY Act brings hope for compliance breakthroughs in the encryption industry, but also presents a rigorous test of decentralization. It marks the shift of US cryptocurrency regulation from "chaotic accountability" to "regulatory guidance", but whether the industry should ultimately follow this development pattern and lose innovation vitality due to high thresholds remains to be tested by time. For the cryptocurrency industry, this is both a new starting point for compliance and a long-term game between the essence of decentralization and commercial interests.