Lawmakers Advance Landmark Crypto Market Structure Bill Amid Concerns Over Decentralisation Loophole
Introduction of the Clarity Act
On June 11, 2025, lawmakers in the U.S. took significant steps towards establishing a regulatory framework for the cryptocurrency industry as they advanced the Clarity Act during two separate committee hearings. The bill, which aims to provide clearer guidelines for crypto trading and decentralised finance (DeFi), has sparked intense debate among lawmakers, particularly regarding the potential for regulatory loopholes that could emerge from its provisions.
Vote Outcomes in the House Committees
The Clarity Act successfully passed through the House of Representatives’ Agriculture Committee with a remarkable 47-6 vote. Notably, many Democrats supported the bill, demonstrating bipartisan agreement on the need for regulation. It later moved to the House Financial Services Committee, where the vote was narrower, winning approval at 32-19 following a prolonged hearing that highlighted sharp concerns from some Democratic representatives.
Decentralisation Concerns and Regulatory Implications
A primary feature of the Clarity Act is its proposal to alleviate regulatory burdens on organisations that can certify themselves as "sufficiently mature" or decentralised. However, many Democrats expressed apprehension that the act may invite a high volume of crypto companies to falsely claim decentralisation—what critics have dubbed "decentralisation theatre"—to receive more favorable regulatory treatment.
The bill designates the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) as joint overseers of the crypto industry. It stipulates that the SEC must respond to applications for maturity classification within 120 days, or applicants can self-certify their status. The bill’s supporters argue that it will untangle the existing regulatory overlap between the CFTC and SEC, promoting a more stable environment for crypto innovation. However, some lawmakers worry this could overwhelm the SEC, which is already facing resource constraints.
Representative Bill Foster, a Democrat from Illinois, remarked on this issue, stating, "There are a bazillion crypto assets being spun up every day… It seems like that’s a potential huge loophole."
Commitments and Funding Needs
To address these rising concerns, Republican committee members underscored the necessity for the SEC to receive adequate funding to cope with the anticipated influx of applications. Representative French Hill of Arkansas, chair of the Financial Services Committee, emphasized the importance of ensuring that the SEC is appropriately equipped to handle its responsibilities under the new legislation.
Another Republican member, Representative Bryan Steil from Wisconsin, reassured critics by noting that applicants could be held liable for any misleading claims about their decentralisation status. This point is intended to mitigate concerns regarding potential exploitation of the legislation.
Moderative Amendments and Political Dynamics
Despite a spirit of cooperation in the Agriculture Committee, more controversial amendments proposed by Democrats faced rejection during the debate in the Financial Services Committee. Among these amendments were proposals to prevent the federal government from buying cryptocurrency, a prohibition on bailing out insolvent crypto firms, and stipulations to maintain bipartisan leadership within both regulatory bodies.
Democratic Representative Sean Casten of Illinois cautioned against potential future implications of the bill’s provisions for rulemaking. He expressed fears that the absence of a balanced political voice on the SEC could lead to rules unfriendly to the industry or overly conducive to political interest.
Conclusion
As lawmakers continue to refine the Clarity Act, the ultimate impact of this legislation remains to be seen. While it promises to bring a semblance of order to the burgeoning cryptocurrency industry, the fears over decentralisation loopholes and regulatory clarity highlight the complexities of governing an ever-evolving landscape. The outcome of this legislative push could shape the future of crypto regulation in the United States for years to come.
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