[Deep Dive] CLARITY Act Nears Senate Approval: Key Issues in Crypto Regulation and Market Impact

Background and Legislative Intent of the CLARITY Act

The CLARITY Act, currently under review in the U.S. Senate, is a core legislative proposal designed to resolve regulatory uncertainty in the digital asset industry. Historically, the U.S. crypto market has been exposed to jurisdictional disputes between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) without a codified regulatory framework. This environment fostered a reactive approach of "regulation by enforcement," significantly degrading the industry's predictability.

The primary objective of the CLARITY Act is to establish clear legal standards that classify digital assets as either 'securities' or 'commodities' based on their underlying characteristics. Having passed the House of Representatives in July 2025 and the Senate Banking Committee in May 2026, the bill now faces a final floor vote, drawing the attention of the global industry and institutional investors.

Establishing Jurisdiction: Dividing Roles Between the SEC and CFTC

The framework centers on the clear distribution of jurisdiction based on issuance and distribution structures. It refines the criteria previously reliant solely on the Howey Test to solidify the boundaries of regulatory authority.

Classification of Digital Commodities and Securities

Under the legislation, digital assets that exhibit the characteristics of investment contracts will remain under the jurisdiction of the SEC. Conversely, digital commodities operating outside the control of a centralized entity, such as Bitcoin, will fall under the exclusive purview of the CFTC. This provides a foundation for resolving the structural inefficiencies faced by exchanges that previously had to navigate conflicting requirements from both agencies.

The Mature Blockchain Test

A novel mechanism introduced in the bill is the 'Mature Blockchain Test,' which provides quantitative and qualitative criteria to evaluate whether a project has achieved decentralization. If a digital asset network is initially classified as a security, this test offers a defined pathway for the asset to transition to a CFTC-regulated digital commodity once it reaches a sufficient level of decentralization.

Key Issues for Senate Approval and Outlook

As of July 2026, the period following the Senate's return from recess until the August 7th summer break is considered a critical window for the passage of the CLARITY Act. However, several political and structural issues remain to be resolved through bipartisan agreement prior to a floor vote.

• Restrictions on Stablecoin Yields: Reflecting demands from the traditional banking sector, the bill includes provisions that prohibit the payment of deposit-like interest to stablecoin holders. Refinements are underway to permit staking rewards derived from network validation participation.
• Scope of DeFi Regulations: Disagreements persist between the industry and regulators over whether decentralized finance protocols, which lack centralized operators, should be subject to the same Anti-Money Laundering (AML) obligations as traditional financial institutions.
• Enhanced Ethics Rules: Certain lawmakers are demanding the inclusion of stricter ethics rules that restrict senior regulatory officials from holding or trading digital assets, acting as a variable in the expedited processing of the bill.

If the legislation is not processed before the August recess, there is a probability that enactment within the year will fail as the political focus shifts to the November midterm elections. Therefore, the progress of Senate negotiations over the next three weeks will serve as a primary indicator determining the institutional landscape of the U.S. crypto market beyond 2027.

Institutional investors anticipate that the passage of the CLARITY Act will catalyze significant capital inflows by mitigating regulatory risks. It is necessary to closely monitor how these shifts in the regulatory environment will influence the strategies of market participants.