Ending Regulatory Blurring: The CLARITY Act Reshapes US Crypto Leadership

According to Woofun AI, a16z crypto co-founder Marc Andreessen and a16z crypto founder Chris Dixon recently had in-depth discussions focusing on the urgency and strategic value of the CLARITY Act. The two pointed out that the current crypto industry urgently needs a clear and lasting federal regulatory framework to end the long-standing legal grey area. The bill aims to clarify the boundaries of jurisdiction between the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), establish intermediary agency compliance standards, and define developer responsibilities to provide a predictable operating environment for responsible businesses while preventing regulatory arbitrage from leading to industrial exodus.

This discussion is not only about industry compliance, but also directly relates to America's technological leadership and security advantages in the global digital asset sector. As crypto infrastructure matures, maintaining the status quo is seen as the greatest risk, and legislative action is a key step in strengthening America's financial innovation position. The conversation thoroughly discussed how the bill balances consumer protection, enforcement needs, and technological innovation, and revealed the consequences of regulatory fragmentation and declining competitiveness that the US may face if the bill fails to pass.

This consensus is rapidly forming among legislators from both parties, law enforcement agencies, and mainstream financial institutions, marking a historic shift in the crypto industry from the margins to mainstream regulatory perspectives.

Data compiled by Woofun AI shows that the crypto industry has evolved from an early testing ground for tech enthusiasts to a mature infrastructure supporting trillions of dollars in transactions. As a core component, stablecoins have an annual transaction volume comparable to the Visa (V.US) network, showing strong network effects and depth of liquidity. Traditional financial giants are speeding up the deployment of on-chain businesses. Banks, asset management companies, bank card organizations, and fintech companies are developing new products around stablecoins, tokenized stocks, tokenized deposits, and other digital assets. Improved performance of the underlying blockchain network has further lowered the threshold of use. Transactions that used to cost several dollars can now be settled in less than a second on widely used public chains, and the cost is less than a cent.

However, there are still structural gaps in the US regulatory system. Although the GENIUS Act, which came into effect in July 2025, establishes a federal framework for stablecoins, the blockchain network and trading market that supports the operation of stablecoins still lack a complete federal regulatory system.

This situation of 'only regulating mobile phones, not base stations' has caused the market to remain in legal uncertainty for a long time. Marc Andreessen emphasized that the industry is not seeking subsidies or protectionist policies, but rather craves a long-term stable set of rules to conduct business responsibly. Although guidelines issued by regulators can fill some gaps, they are vulnerable to government changes or institutional leadership changes, and cannot provide enterprises with investment certainty for as long as five or even ten years. Businesses need to clarify rules, jurisdiction, and product legality expectations, and the CLARITY Act provides the long-term framework for this.

The core consumer protection flaw in the current crypto market is that trading platforms are not subject to a complete federal system, and traditional trading venues such as the New York Stock Exchange and NASDAQ (NDAQ.US) have long been incorporated into strict regulatory systems. The New York Stock Exchange and NASDAQ (NDAQ.US) have clear federal regulators that implement registration, supervision, auditing, information disclosure, transaction monitoring, and customer asset protection systems. In contrast, crypto trading platforms have long lacked uniform standards covering the entire market. The CLARITY Act aims to fill this gap by providing a clear path for digital assets to transition from SEC regulation to CFTC regulation.

Federally registered crypto trading platforms will be subject to strict auditing and financial control requirements, must properly protect customer assets, comply with anti-fraud and anti-insider trading regulations, and disclose operational information to regulators.

Companies that fail to meet these standards will be barred from operating lawfully in the US. These measures are designed to prevent the FTX crash from happening again. It is alleged that FTX transferred funds between related entities, internal controls were lacking, and the actual customer assets held were seriously inconsistent with the amounts claimed. Although federal regulation cannot completely eliminate fraud, it can greatly increase the difficulty of concealing, enabling regulators to step in before the problem becomes a disaster. The same principles apply to stablecoin products. Terra-Luna was once touted as a stable asset, but was not backed by dollar reserves or other stable assets. Compliant US dollar stablecoins must be fully supported and audited by the corresponding reserves, and the CLARITY Act extends such restrictions to other parts of the crypto market to ensure the safety of consumer assets.

Vague regulatory rules often lead to bottom competition, rewarding violators rather than law-abiding companies. A US company that takes compliance seriously needs to invest heavily in lawyers, internal controls, audits, sanctions screening, and customer protection. These costs can slow down product development. In contrast, offshore competitors can eliminate compliance expenses, replicate products, and provide services at lower prices. The speed advantage stems precisely from evading compliance. As a result, uncertainty punishes responsible businesses while offshoring competitors profit. Chris Dixon pointed out that as long as there is a grey area of regulation, the market will basically compete to the bottom, eventually allowing bad players to take advantage.

The CLARITY Act addresses this issue by delineating regulatory boundaries: clarifying which businesses are intermediaries, what rules apply, which agency regulates them, and the consequences of non-compliance. Any company that keeps customer funds or helps complete financial transactions must comply with the same anti-money laundering, sanctions, and Ministry of Finance regulations as similar financial institutions such as payment service providers and fintech companies. Clear rules benefit businesses that are willing to meet standards, while grey areas benefit those who take advantage of the hole. By eliminating regulatory arbitrage space, the bill aims to re-establish a level playing field, ensure that law-abiding US trading platforms are no longer at a disadvantage due to compliance costs, and prevent non-compliant offshore platforms from providing services to US users.

Blockchain transparency is often misunderstood as anonymity, but in reality, public blockchain transactions are permanently stored on a public ledger. Although the wallet address does not directly reveal the legal name, investigators can track the flow of funds and link activity to trading platforms, accounts, devices, or other identifiable information. Records from years later still exist, enabling law enforcement to uncover evidence that was not available at the time of the transaction. Some national security officials have described crypto transactions as “leaving a mark for future prosecutions,” as records left today may help identify and prosecute criminals in the future. In contrast, some traditional payment methods leave no public trace, and blockchain provides a traceable path.

However, traceability and privacy are two different issues. Ordinary people should not be forced to disclose every medical expense or transfer due to the use of blockchain. The current financial system recognizes the need for privacy of ordinary people, while requiring supervisory authorities to comply with sanctions and anti-money laundering obligations. The early Internet encryption technology debate provided a reference: strong encryption technology was once viewed as a threat and even classified as military technology export control, but eventually became the foundation for secure banking, e-commerce, and secure communications. Blockchain privacy faces the same boundaries: protecting legitimate activity while prosecuting hidden acts aimed at evading the law. The CLARITY Act will apply anti-money laundering and Treasury rules to other market intermediaries, as well as to crypto intermediaries, balancing privacy protection and enforcement requirements.

Banks' concerns about the stablecoin interest payment ban stem from concerns that stablecoin issuers and wallet service providers are reconstructing deposit accounts in disguise outside the banking system, causing consumers to transfer deposits to stablecoin products and reduce the sources of bank loan funds. The CLARITY Act responds to this demand by prohibiting interest payments on stablecoin balances and prohibiting products whose functionality or economic effects are equivalent to interest-bearing accounts.

However, the Act allows rewards based on transactional actions, such as wallet service providers or retailers to reward customers who use stablecoins to make purchases, similar to credit card points or membership reward programs. The difference is that the former is rewarded for spending while the latter only charges interest based on the balance held.

This compromise solution satisfies the bank's main demands, and at the same time, it does not prohibit ordinary reward programs. Notably, the bank making the claim itself is also using blockchain technology. Major financial institutions such as Goldman Sachs (GS.US), Fidelity, BlackRock (BLK.US), Stripe, Wells Fargo (WFC.US), and JPMorgan Chase (JPM.US) have developed or supported blockchain products. Chris Dixon pointed out that blockchain provides a unified framework for the financial industry to resolve coordination issues, enable financial institutions to reduce intermediary levels, settle assets on common infrastructure, and collaborate to promote modernization rather than rebuild systems separately. Banks see the same opportunities as the crypto industry: existing financial infrastructure is fragmented, transformation is difficult, and blockchain provides a shared framework.

The CLARITY Act defines developer liability and distinguishes between knowingly aiding a crime and publishing generic software. Developers are still liable if they develop tools for criminal use, market to criminals, or directly assist in illegal activities. However, the bill denies developers unlimited liability for all unforeseen and uncontrollable downstream uses. Open source code can be copied, modified, and deployed for scenarios not anticipated by the original author. If developers are required to be responsible for all uses, open source software development will be unsustainable. Marc Andreessen, for example, if a criminal plans a crime at a hotel, the hotelier should not be viewed as a conspirator.

This principle isn't limited to the crypto industry; academic research, startups, venture capital, and open AI models all rely on open source software. A workable line of responsibility should be based on subjective intention and actual participation: knowing and assisting the offender should be held to account, and the misuse of a neutral tool by others cannot automatically be blamed on the developer.

This definition protects the innovation ecosystem, ensures that developers do not face unlimited legal risks due to potential misuse, while retaining the ability to prosecute malicious acts and balancing technological innovation with legal liability.

The application logic of securities law is reflected in the CLARITY Act as a dynamic regulatory framework based on the degree of decentralization. A security will not automatically become a non-security as a result of going on the chain. Tokenized stocks are still stocks. They are securities and continue to be regulated by the SEC. Companies cannot circumvent information disclosure, registration, and investor protection requirements through on-chain or “tokens.” Chris Dixon stressed that the bill enshrines this into law, provides a clear definition, and avoids having to go through litigation to determine the nature every time. The core of the bill is to regulate digital assets that change as the network evolves. New blockchain networks usually start with centralized entities, such as founders, companies, or small teams that control the network, grasp unknown information from the public, and influence the value of tokens.

At this stage, the relevant assets are regulated by the SEC and are subject to securities requirements, including disclosure of information, insider restrictions, and lockdown periods for founders and early investors. With the development of the network, control is gradually scattered. If the decentralization threshold stipulated in the Act is reached, the nature of the asset is closer to the commodity, and the supervisory responsibility is transferred to the CFTC. This is not unregulated; commodity regulation also deals with abuses such as fraud, market manipulation, and hoarding control. Changes in regulators are due to changes in the nature of assets. The bill also introduces new restrictions. While the network is controlled by centralized entities, founders, venture capital institutions, and other insiders face longer lockdown periods and stricter information disclosure obligations to prevent ordinary participants from selling assets before they receive the same information or products are not sufficiently decentralized.

If the CLARITY Act fails to pass, crypto regulation will not disappear, and agencies such as the SEC, CFTC, and the US Treasury will continue to issue guidelines and use existing powers to establish rules. The problem is that once the government changes, the regulator's interpretation of the law may change accordingly. Companies may spend years developing products according to a set of expectations, but face completely different interpretations after elections or institutional leadership changes.

This uncertainty affects investment and consumer protection. Long-term frameworks can clarify the powers of regulators, requiring businesses to complete registration, disclose information, protect customer assets, and comply with market rules. There is no legislation, and responsibilities are scattered across different systems, which can cause controversy at any time. Chris Dixon pointed out that if the rules are constantly changing, companies are naturally unwilling to invest a lot of time and capital in development. The industry has gone through years of tough enforcement and political hostility, and the result is more likely to be that companies move to other regions and develop rather than disappear. There will be less supervision the US can carry out; it will be harder for regulators to oversee offshore companies; it will be harder for law enforcement to reach these companies; they will be less willing to build products around US standards. Industrial exodus will weaken the influence of US regulation, leading to loss of economic opportunities and security advantages.

The strategic significance of the CLARITY Act is to continue America's tradition of leading technology. Once a technology is invented, it usually doesn't go away; the key is where it develops, the dominant company, and the rules that shape it. For more than a century, the United States has benefited from the advantages of the birth and development of major technologies in the country. Technological leadership has brought enterprises, employment, taxation, and professional capabilities, and provided economic resources and security advantages for key national affairs. The history of cryptographic technology development shows the stakes: when the US restricted the export of strong cryptographic technology, foreign competitors did not stop developing, but instead placed products outside the US, and users switched to using them.

It was only after restrictions were adjusted that US companies were able to participate in building a secure Internet economy. Blockchain technology faces the same problems, and future financial systems, technical standards, and leading companies will always appear somewhere. If it develops mainly overseas, the US will lose both economic opportunities and regulatory influence. The CLARITY Act provides a reason for responsible businesses to build in accordance with US law, benefits consumers, law enforcement, national security, and helps the US participate in setting next-generation financial infrastructure standards. Supporters include bipartisan lawmakers, law enforcement organizations, financial institutions, and technology companies.

The Fraternal Order of Police (Fraternal Order of Police), as the largest law enforcement organization in the US, expressed support for the bill and refuted claims that “the bill would weaken sanctions or anti-money laundering enforcement.” Goldman Sachs (GS.US) CEO David Solomon has endorsed the bill, and other financial institutions and fintech companies are developing blockchain products. Multiple parties agree that the US needs a clear and enforceable set of digital asset market rules to replace uncertainty, strengthen consumer protection, support law enforcement, and increase the possibility of next-generation financial technology developing in the US.