US Senate Unveils Principles For Its Version Of CLARITY Act

The US Senate is forging ahead with developing its version of the CLARITY Act, having passed the stablecoin bill last week. As part of the plans for this market structure bill, the Senate Banking Committee, through the subcommittee on Digital Assets, has released principles for this bill ahead of today’s hearing.

US Senate Releases Principles For CLARITY Act

In a press release, the Senate Banking Committee Chairman Tim Scott and the Subcommittee on Digital Assets released a set of principles for the development of a comprehensive market structure legislation. The Senators noted that these principles will guide discussions and negotiations as they engage with stakeholders on the bill text.

CoinGape had reported earlier that the Senate plans to unveil its CLARITY Act draft on the crypto market structure bill by June 24. This move forms part of the legislative process, even as the subcommittee holds a hearing on the bill today.

The market structure principles state that the legislation should clearly define the legal status of digital assets, in a bid to provide regulatory clarity for the crypto industry. As part of providing clarity, the senators hope to distinguish “digital asset securities from digital asset commodities” in the statute.

Secondly, the principles state that there should be a clear allocation of jurisdiction among regulators. Basically, the CLARITY Act will aim to allocate regulatory obligations to several regulators, including the SEC and CFTC, rather than having an “all-encompassing” regulator.

Furthermore, it proposes that regulations should be modernized to account for the unique nature of digital assets and distributed ledger technology. As part of this, the senators plan to include a new SEC exemption for certain digital asset fundraising in the legislation.

There will also be a provision for the SEC to revisit its burdensome registration requirements for digital asset issuers and provide a clear framework for compliance from these issuers. At the June 10 SEC Crypto roundtable, SEC Chair Paul Atkins revealed that they were already working on a regulatory framework for on-chain financial markets.

Protection For Crypto Investors

The principles for the CLARITY Act also provide that the legislation should protect those who purchase or trade digital assets. This includes subjecting centralized digital asset intermediaries to “innovative-friendly registration and risk management requirements.”

The legislation would also ensure that customer funds are protected during bankruptcy. The principles also direct the senators to include measures that aim to prevent money laundering and sanctions evasion with digital assets.

The market structure bill will also include provisions that regulators adopt a welcoming approach to innovations in the crypto industry. This provision will require Federal financial regulators to provide clear guidance affirming that many crypto-related activities are permissible for banks and other financial institutions.

The Federal Reserve looks to have taken the first step towards this as the US Central Bank has removed the ‘reputational risk’ factor, which penalized crypto banking.