Author: Eric, Foresight News
On January 15, Beijing time, crypto journalist Eleanor Terrett reported that the U.S. Senate Banking Committee (hereinafter referred to as the "Banking Committee") had canceled its internal review of the "Digital Asset Market Clarity Act" originally scheduled for this Thursday (local U.S. time) due to Coinbase's public opposition. No further schedule has been announced.
This Thursday was originally scheduled for internal reviews by both the Senate Banking Committee and the Senate Agriculture Committee (hereinafter referred to as the "Agriculture Committee"). However, the Agriculture Committee postponed its session to the end of the month due to bipartisan disagreements, while the Banking Committee has just been revealed to have also postponed its review, with a subsequent schedule yet to be determined.
The "Clarity for the Cryptocurrency Markets Act" (commonly referred to as the CLARITY Act) is a regulatory framework that the entire Web3 industry eagerly anticipates. Overall, the CLARITY Act aims to establish a clear regulatory framework for digital assets, determining "who should be regulated, who regulates, and the extent of regulation." It seeks to address the long-standing issue of ambiguous regulatory boundaries in the digital asset space and the problem of "replacing regulation with enforcement."
However, after the full text of the bill proposed by the banking committee was revealed, all industry participants were stunned. The bill imposes nearly harsh regulatory requirements on Web3 projects and related industry entities, with strict rules governing token fundraising, transfers, and sales—regardless of registration exemptions. Some industry participants jokingly remarked that the bill hardly resembles one drafted by a pro-cryptocurrency government, but rather something the Harris administration would propose.
Who drafts the bill?
For readers who are not yet familiar with the CLARITY Act, here is a brief background introduction.
In July 2025, the U.S. House of Representatives passed the initial version of the CLARITY Act with 294 votes in favor and 134 against, and submitted it to the Senate. After the House passed the bill, the market was optimistic that it would pass in the Senate by Thanksgiving Day 2025, at the latest by the end of the year. However, in reality, because the bill involves the division of regulatory authority between the U.S. Securities and Exchange Commission (SEC) and the U.S. Commodity Futures Trading Commission (CFTC), the Senate version will be drafted separately by the Banking Committee, which oversees the SEC, and the Agriculture Committee, which oversees the CFTC. Each committee will internally approve its portion, then integrate them into a single bill for a full Senate vote.
Regarding the CLARITY Act, the Banking Committee's proposed content includes the definition of tokens, limitations on the SEC's regulatory authority, registration and exemption provisions for Web3 projects, and some provisions involving banks and stablecoins. The Agriculture Committee's proposed content includes the CFTC's regulatory scope and the rights and obligations of intermediaries such as exchanges. As for why the Agriculture Committee is involved, it is because in the early years, commodity futures only included agricultural products, so the CFTC was placed under the supervision of the Agriculture Committee. Even after the futures market later expanded to include precious metals, energy, and even cryptocurrencies, the U.S. government has not changed the entity responsible for overseeing the CFTC.
Currently, the CLARITY Act is stuck on reaching consensus within two committees, and there has not yet been agreement on a basic version. After that, both committees will need to conduct internal reviews and consolidate the bill, meaning there is still a long way to go before it reaches a full Senate vote.
Why is the bill described as "harsh"?
Objectively speaking, this bill is welcomed by retail investors; however, for institutions and project parties that have spent real money lobbying and invested significant effort providing advice, it imposes numerous restrictions, falling far short of the previously anticipated "encouragement of innovation."
New Definition of Token
In the new definition of "tokens" in the bill, native tokens of public blockchains (e.g., ETH for Ethereum, SOL for Solana) are categorized as "Network Tokens," which are not considered securities but require mandatory information disclosure in accordance with regulations. Tokens from Web3 projects such as DApps are defined as "Ancillary Assets," which fall under the category of "investment contracts." While these may qualify for registration exemptions, they still face transfer restrictions and disclosure requirements.
Regarding NFTs, apart from NFTs of types such as artworks, tickets, and membership privileges that are not considered securities, large-scale-minted and tradable NFTs, fractionalized NFTs, and NFTs representing economic rights to underlying assets will all be regarded as securities. Under such regulations, "blue-chip NFTs," including Pudgy Penguins and Moonbirds, which are about to launch a token, will also be considered as securities.
As for tokenized securities, such as stocks, the bill clearly requires that all existing securities laws apply in full. The bill only makes "adjustments" to technical details and does not provide any exemptions for the securities attributes themselves. All RWA (Real-World Assets) that meet the definition of securities cannot avoid regulation through tokenization, and the once-popular U.S. stock tokenization trading platforms may also need to comply with regulatory requirements applicable to brokerage firms.
Although this bill is somewhat milder compared to the SEC's previous "everything is a security" approach, the disclosure and transfer requirements are unexpectedly strict.
According to the bill, before a project is recognized as "decentralized," it must submit required disclosure information to the SEC at least 30 days prior to the token issuance. This information includes company details, financials, token economics, risk factors, and so on. Additionally, disclosures must be submitted every six months for a duration of three years. Only after submitting a "termination certification" to confirm that the project has become "decentralized" can the disclosure requirements be discontinued.
In addition, prior to being recognized as decentralized, affiliates (founders, employees, and controllers) may not transfer more than a specified number of tokens (the exact amount is yet to be determined) within 12 months. After being certified as decentralized, affiliates are still required to lock their tokens for 6 months and may not transfer more than 10% of the annual circulation amount in any 12-month period. The criteria for certifying decentralization include three aspects: whether the code is open source, whether token ownership is sufficiently distributed, and whether on-chain governance is effective. Specific numerical thresholds will be determined additionally by the SEC. After a project submits an application, it will be considered approved if the SEC directly certifies it or if no objections are raised within 90 days.
In summary, although many tokens are no longer classified as securities, the disclosure requirements remain very strict, and many restrictions can only be lifted after the SEC recognizes a project as decentralized. To date, a large number of projects have established "liquidity incentive pools" or "community funds" accounting for more than 20% of the total token supply. According to current legal requirements, project teams may have to wait until these funds are fully distributed before they can apply for decentralized status certification.
Registration and fundraising for new tokens
For projects seeking to raise funds by issuing tokens, two strict requirements must be met to qualify for registration exemption: the annual fundraising amount must be less than $50 million and the total fundraising amount must be less than $200 million; and the tokens issued during fundraising and the funds invested by investors must be held by a third-party custodian. If either of these requirements is not met, the project must register with the SEC under U.S. investment laws.
The cap on fundraising amounts is easy to understand. The requirement regarding escrow means that the project team will not have ownership of the raised funds until the tokens can be transferred to investors. This regulation will eliminate many current ICOs that arbitrarily change rules and allow excessive fundraising. In the future, all token fundraising activities may need to have their rules predetermined in advance. Since participants will be depositing their funds with an escrow agent, they may also face KYC and other types of scrutiny from the escrow service.
If the project's fundraising amount exceeds the limit or the project refuses to use a custodian, it must follow the normal registration process according to the investment law; otherwise, it would be considered illegal. Even if the project qualifies for exemptions, it still needs to comply with the aforementioned information disclosure requirements until the project completes its decentralization verification.
DeFi Regulation and Developer Protection
In the context of DeFi, if a protocol can be controlled, modified, or censored by an individual or group, it will be considered "not decentralized" and must be registered as a securities intermediary, complying with SEC and FinCEN regulations (including AML, KYC, and record-keeping requirements). If the DeFi frontend is operated by a U.S.-based entity, it must use on-chain analysis tools to screen sanctioned addresses, block transactions with sanctioned addresses, and implement risk assessments and record-keeping.
If deemed decentralized, it would be no different from other decentralized projects and would largely avoid regulatory scrutiny.
For protocol developers who are not members of the project team, they will be exempted if they merely write code, maintain the system, or provide nodes, liquidity pools, etc., provided that they do not have the authority to control protocol rules. However, anti-fraud and anti-manipulation clauses still apply to such developers.
Digital Asset Brokerage and Banking
The bill stipulates that digital assets are included under the Bank Secrecy Act. Digital asset brokers, dealers (e.g., market makers), and exchanges must establish AML/CFT (Anti-Money Laundering and Combating the Financing of Terrorism) programs, register as money service businesses, comply with sanctions regulations of the U.S. Department of Treasury's Office of Foreign Assets Control (OFAC), report suspicious transactions, and implement customer due diligence procedures, among other requirements.
Regarding banks, the bill allows them to engage in various digital asset-related activities, including custody, trading, lending, issuing stablecoins, operating nodes, and developing self-custody wallet software. Additionally, the bill includes specific provisions regarding stablecoins: it prohibits offering interest solely for holding stablecoins, but permits "activity-based rewards" based on transactions, liquidity provision, governance, and similar activities. Banks are also prohibited from advertising stablecoins as "similar to deposits" or implying FDIC insurance when promoting them.
Decentralization is no exception.
Coinbase founder Brian Armstrong posted on X, pointing out what he sees as the issues: effectively banning tokenized stocks; granting the government regulatory access to users' DeFi transaction records; further expanding the SEC's authority and stifling innovation; and banning stablecoin rewards, which gives banks the ability to compete against their rivals.
From an objective standpoint, this bill has practically offended every participant in the industry: Web3 projects must regularly disclose information and face regulations on cashing out; exchanges and traditional brokers are virtually treated the same; NFTs are essentially banned; DeFi faces numerous restrictions; and the financial situations of individual investors in cryptocurrencies are fully exposed.
The good news is that this bill significantly increases the cost of malicious behavior for project developers. To cash out, they must do so when the token price is still attractive while the project meets decentralization requirements, and they can no longer privately cash out through OTC channels. Investors can now learn about the true nature of a project through regular information disclosures, and are no longer easily deceived by persuasive but misleading statements on platforms like X. Additionally, these new compliance requirements raise the entry barriers for small companies, allowing larger firms to maintain their monopolistic positions more effectively.
The current bill does not treat the Web3 industry as an emerging sector, but instead unhesitatingly incorporates it into the traditional financial regulatory framework. Obviously, the major financial backers behind the banking committee—Wall Street banks and other financial institutions—cannot accept the loss of their authority and pricing power. New players wishing to enter the field must comply with rules that may have been established over a century ago. Within this framework, cryptocurrencies are merely considered another form of security.
Another reason for the deviation in the bill's content stems from the political competition between the two parties. The political dynamics behind the CLARITY Act are actually quite complex. Regarding the bill itself, the Republican Party, to which Trump belongs, aims to provide a lenient regulatory environment to make the United States the "crypto capital of the world." However, the Democratic Party believes that the provisions drafted by the Republicans are too lax, and that an approach "pro-industry, weak regulation" would not fully protect investors' interests. It would also encourage behaviors like Trump himself issuing cryptocurrency, which is seen as "political corruption."
For the Republicans, who hold 53 seats, they need 60 votes to avoid triggering a filibuster (a Senate rule designed to protect the minority party's voice, allowing senators to make unlimited speeches; as long as the majority party does not have 60 votes to pass a motion to end debate, the minority party can use a filibuster to indefinitely delay a bill's vote). This means they need to secure the support of at least seven Democratic senators to safely pass a bill.
However, as the 2026 midterm elections approach in November, Trump's almost openly manipulative behavior in the cryptocurrency sector has caused some Republican lawmakers to worry that supporting a lenient bill might provoke dissatisfaction among certain voters. This situation has placed Republicans under even greater pressure.
From the outcome, it appears that either the Republicans were never genuinely committed to supporting innovation, or they made significant compromises under pressure from the Democrats. According to Alex Thorn, Galaxy's head of research, who posted on X on January 7, the Democrats at that time proposed demands for changes to the front-end, DeFi, and borrowing limits, and these demands are reflected in the bill revealed publicly yesterday. It seems the deviation in the bill's content likely stemmed more from Republican compromises.
Unlike Coinbase, a16z and Kraken believe that although the bill is indeed still imperfect, it should not be further delayed. For venture capitalists (VCs), stricter regulation could directly eliminate Meme tokens and create more room for "VC coins." However, for retail investors, the flip side of investor protection would be the loss of decentralization. The house advantage in the crypto casino would no longer be held by some random individual, but instead, the pricing power of surviving tokens would fall back into the hands of capital.
The current CLARITY Act is less of a protective amulet for investors and more of a capital's decree taming the cryptocurrency sector.