What Should the Clarity Act Focus on After the Genius Act
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What Should the Clarity Act Focus on After the Genius Act
From the edge to the center, finally into the spotlight.
Navigating Web3 tides with focused insightsAuthor: Zuoye
Crypto Week triple blow: the Genius Act, which specifically regulates stablecoins, has become law, while the anti-CBDC bill and the CLARITY Act remain in the legislative process.
Unlike the Genius Act, CLARITY addresses foundational definitions and jurisdictional allocations for crypto—especially public blockchains, DeFi, token issuance, and the powers and responsibilities of the SEC and CFTC—and is closely linked to the 2024 FIT21 Act.
Caption: U.S. crypto regulatory framework, Image source: @zuoyeweb3
Based on this, the U.S. has constructed a complete regulatory framework abstracted from past practices—understanding history is key to clarifying the future.
Financial Liberalization, the Wild New West
Minting rights and inflation: the Fed clings to the former in the name of controlling the latter, while Trump abandons the latter in the name of amplifying the former.
The Genius Act launched the era of free stablecoins. Powell's insistence on independent minting power has been fragmented and handed over to Silicon Valley newcomers and Wall Street old money—but it’s still not enough. Peter Thiel wants absolute freedom for libertarians.
In 2008, the financial crisis made financial derivatives the target of widespread criticism. Obama urgently needed experts to rein in a futures market worth $35 trillion and a swaps market worth $400 trillion.
Thus, Gary Gensler was nominated as Chair of the CFTC, and in 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted, bringing derivatives markets under the existing regulatory system.
Gary claimed, "We must tame the wild west"—this marked the first time he defeated the market from a regulatory standpoint.
History repeats itself. In 2021, Obama’s ally, then-President Biden, once again nominated Gary Gensler as SEC Chair, attempting to bring the new frontier—crypto—under control.
Two focal points emerged:
1. The SEC has no dispute over BTC/ETH being commodities, but considers other tokens and IXOs illegal securities offerings, including SOL and Ripple;
2. Regarding high leverage practices by exchanges, Gary believes they "induce" users, leading to special regulatory actions against onshore and offshore platforms like Coinbase and Binance.
Yet, despite meticulous planning, Gary ultimately stumbled on ETFs—a product that initially seemed outside regulatory focus. In 2021, the SEC approved Bitcoin futures ETFs but kept its gates closed on spot ETFs proposed by Grayscale and others.
Unfortunately or fortunately, after the SEC partially lost its case against Ripple’s IXO in 2024, it finally approved Bitcoin spot ETFs, allowing MicroStrategy to openly engage in the stock-bond-crypto cycle.
This time, crypto represented the wilder side, conquering the SEC, CFTC, White House, Congress, the Fed, and Wall Street—the era of open season has arrived.
A small footnote: SBF successfully sent himself to prison in 2022 by donating tens of millions in campaign funds to Biden—perhaps a key reason why Gary became so strict toward the crypto industry.
The CLARITY Act: Crypto Finally Gets Legitimized
Trump always repays favors—now the crypto industry can operate in broad daylight.
In 2025, treating the legacy of two Democratic presidents as relics, Trump immediately fired Gary upon taking office and appointed Paul Atkins, who had allied with him since 2016, ushering in full laissez-faire governance.
The CLARITY Act emerged against this backdrop. However, it should be noted that the CLARITY Act is still in the legislative process—it has passed the House but still awaits Senate review.
The Senate also has its own Digital Asset Market Structure and Investor Protection Act, but under Republican-led agendas, crypto-friendly legislation is inevitable.
Caption: Next steps for the CLARITY Act, Image source: @zuoyeweb3
The current CLARITY Act designs a framework for digital commodities, digital assets, and stablecoins—first limiting stablecoins to payment forms, then assigning digital commodities to CFTC oversight and digital assets to SEC regulation.
Caption: CLARITY Act regulatory framework, Image source: @zuoyeweb
1. CFTC wins big: clearly establishes ETH and CFTC authority, blurs SEC boundaries and asset issuance.
ETH is a commodity; truly decentralized public chain tokens are all commodities, their trading falls under CFTC jurisdiction. Fundraising via IXO, SAFT, etc., remains under SEC oversight, but with a $75 million exemption threshold. Tokens issued above this limit become exempt if they transition to decentralization within four years.
2. Digital commodities: digital in form, commodity in substance.
Keeping pace with technological development, it moves beyond crude dichotomies like "physical goods" vs. "virtual assets," recognizing digital commodities as long as they serve practical functions for public chains, DeFi, or DAO protocol operations—and thus are not securities.
However! NFTs must be classified as assets, not commodities, because each is unique and possesses only speculative or aesthetic value, unable to function as a uniform exchange medium like currency. Additionally, interest-bearing, reward, or profit-sharing mechanisms are only non-asset if they contribute to maintaining protocol decentralization; otherwise, they fall under SEC jurisdiction.
This definition remains abstract. Essentially, the CLARITY Act distinguishes between the token issuance phase and the token operation phase. Below are three case categories I’ve classified—please correct me if any are inaccurate:
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IXO issuance is a security; issued tokens meeting conditions are not
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Airdropped points are securities; airdropped tokens meeting conditions are not
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Exchange distributions are not securities, but promised returns constitute securities
"Meeting conditions" refers to compliance with the definition of digital commodities and commitment to future decentralization without reliance on intermediaries for trading. However, note that participating in a project itself may constitute investment—if participants expect returns, it qualifies as asset issuance.
Future definitions remain unclear, but many past cases offer reference points:
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ETH is a digital commodity, but raising funds via SAFT for a project constitutes digital asset issuance under SEC oversight. If such a project transitions to a fully decentralized protocol later, it becomes a digital commodity under CFTC jurisdiction.
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Native ETH staking is also a commodity—it's a "system behavior" maintaining the PoS characteristics of the blockchain. But whether third-party DeFi staking protocols’ tokens qualify as commodities remains uncertain—Lido may be questionable, EigenLayer more likely a commodity—specific regulatory details are needed.
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Ethereum is a blockchain, but many L1/L2 chains issuing via SAFT or IXO have four years to achieve decentralization, requiring no single centralized entity to control more than 20% of tokens or voting power. Current foundations or DAOs may not be automatically exempt—token distribution analysis is required.
The CLARITY Act is indeed detailed, establishing a joint regulatory framework between the SEC and CFTC. Digital commodities possess characteristics of both virtual securities and physical goods, necessitating dual oversight.
Conclusion
The CLARITY Act is a pivotal piece of U.S. crypto regulation, fundamentally defining core issues like tokens and public blockchains, clearly establishing the concept of digital commodities—the remainder naturally falls under assets, such as NFTs, stablecoins, and tokenized real-world assets (RWA).
However, DeFi operations remain in a gray zone. Although the CLARITY Act has revised the definition under securities law, DeFi is too significant. Just as there is dedicated securities legislation, the crypto market needs a specific DeFi Act—not lumped together with stablecoins, public chains, and tokens.
This isn’t overreaching. As the U.S. builds its crypto regulatory framework, the Tornado Cash case continues. The fate of co-founder Roman Storm will serve as a litmus test for judicial pressure driving legislative change.
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