tl;dr
Democrats on the House Financial Services Committee held a hearing to critique the CLARITY Act, a bill creating a U.S. legal framework for most crypto assets by exempting them from SEC oversight. Witnesses, including Amanda Fischer from Better Markets, warned the bill's regulatory gaps could lead tr...
Democrats held a House Financial Services Committee hearing to critique the CLARITY Act, a crypto market structure bill that exempts most crypto assets from SEC oversight, raising concerns about potential regulatory gaps impacting traditional securities markets.
Witness Amanda Fischer warned the bill could incentivize financial institutions to shift capital raising to blockchain to evade regulation and reduce costs. She cited comments from Robinhood CEO Vlad Tenev, who noted running a crypto business is significantly cheaper due to fewer regulatory burdens like SEC exams and SIPC insurance.
The CLARITY Act's two-tier system categorizes most crypto as exempt digital commodities, while ‘mature blockchain systems’ face stringent SEC registration, a process few issuers are likely to pursue. Fischer argued that token issuers will exploit loopholes by claiming various exempt statuses—such as DeFi, collectibles, or airdrops—to avoid classification as investment contracts.
Even pro-crypto Democrats, including Rep. Sam Liccardo, expressed worries about the bill’s exclusion of decentralized finance (DeFi) from regulation, fearing unmonitored swift growth in that sector, which the bill explicitly carves out from its framework.
Democratic leaders criticized Republicans for not including provisions to restrict former President Trump’s crypto activities while in office, a point Republicans dismissed as partisan. Republican leaders focused their rebuttals more on these partisan critiques than on addressing the bill’s regulatory concerns.
Overall, the hearing highlighted bipartisan anxiety about creating regulatory gaps that might allow traditional financial institutions and crypto issuers to dodge established securities laws, potentially reshaping market oversight in ways that many fear could undercut investor protections.