The regulatory provisions outlined in the US Digital Asset Market Structure Clarity Act, otherwise known as the CLARITY Act, threaten to give large financial institutions control over crypto, according to Dr. Friederike Ernst, co-founder of the Gnosis blockchain protocol.
Regulations in the CLARITY crypto market structure bill assume that activity must pass through centralized intermediaries, which risks consolidating crypto rails in the hands of a few entrenched players, Ernst told Cointelegraph.
The preface of the CLARITY crypto market structure bill. Source: United States Congress
“Blockchain’s real breakthrough was not just a new financial infrastructure. It was the ability for users themselves to become owners of the networks they rely on,” she said. Ernst added:
“If activity is pushed back through institutional intermediaries, users risk becoming customers renting access to financial technology once again rather than stakeholders in it. The challenge is ensuring regulatory clarity does not unintentionally undermine that ownership model.”
Despite the bill’s shortcomings, the CLARITY Act does clarify regulatory jurisdiction over crypto between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), as well as protects peer-to-peer transactions and self-custody, Ernst said.
However, the failure of the market structure bill to adequately protect open, permissionless blockchain rails and decentralized finance protocols risks bringing all the same points of failure of the legacy financial system to crypto, Ernst said.
Related: Crypto regulatory clarity matters more for banks, ex-CFTC chief says
CLARITY Act stalled due to banks and traditional financial institutions
The highly anticipated CLARITY Act remains stalled in Congress over disagreement between the crypto industry and the banking industry over the issue of stablecoin yield and whether or not stablecoin issuers can share interest with holders.
In January, crypto exchange Coinbase announced it was pulling its support for the bill, citing concerns over provisions that would weaken the decentralized finance industry, prohibit stablecoin yield, and prevent the growth of the tokenized real-world asset sector.
President Trump slams banks for holding up the CLARITY Act. Source: Donald Trump
“We’d rather have no bill than a bad bill,” Coinbase CEO Brian Armstrong said in response to reading a draft of the bill.
US Senator Bernie Moreno said he is optimistic the CLARITY bill will pass by April and head to US President Donald Trump’s desk for signing.
However, if the bill does not pass by April 2026, the odds of it becoming law in 2026 are “extremely low,” according to Alex Thorn, head of firmwide research at investment firm Galaxy.
“It’s very possible that rewards are not the ‘final’ hurdle but instead just the current hill the bill is dying on,” Thorn said in an X post on Saturday, pointing to potential issues around DeFi, developer protections, and regulatory authority.
Magazine: Clarity Act risks repeat of Europe’s mistakes, crypto lawyer warns