Little Learnings #2
The CLARITY Act: are we finally getting sensible regulation for crypto?
This is the second post in a new series (whimsically titled Little Learnings) of educational posts I will be releasing every Friday. The intention behind these is to break down some new interesting topic or development happening in the crypto space. God knows there’s enough happening, and it’s often complicated — so I’m here to try and simplify it a bit.
This post is sponsored by Open Campus
A very fitting sponsor for this issue, Open Campus is building the onchain financial layer for education.
They recently announced a partnership with the Government of Madhya Pradesh (a state in India) to bring 50 MILLION academic records onchain.
Every graduate in the state will have a verified digital credential on EDU Chain.
This is a pretty incredible achievement and will push forward the future of the role of blockchain technology in education.
Learn more here (check it out, it’s genuinely a very cool partnership).
The CLARITY Act: are we finally getting sensible regulation for crypto?
This week we’re talking about the Digital Asset Market CLARITY Act. One of (if not the) most significant pieces of crypto legislation to hit the US Senate.
For years, the crypto industry has begged for regulatory clarity, and it seems like we’re pretty close to getting it. Hopefully no more regulation by enforcement, no more Gary Gensler shenanigans, no more wondering if a token is a security or a commodity.
But not everything is rainbows and butterflies and this week we saw some pretty serious pushback on the act.
What is the CLARITY Act?
The CLARITY Act is an attempt to establish a comprehensive regulatory framework for digital assets in the United States. You can kinda think of it as the crypto industry’s version of finally getting a rulebook. It’s been the wild west for so long and people (and especially businesses) have had to struggle with a lot of regulatory uncertainty, making it very difficult to build and plan for the future.
The bill aims to do a few key things:
Draw a clear line between SEC and CFTC jurisdiction, finally answering which regulator oversees what in crypto.
Create definitions for digital commodities, investment contracts, and payment stablecoins by putting legal definitions to the terms we throw around daily.
Establish disclosure requirements and investor protections to help retail from getting too rekt
Crack down on illicit finance by giving law enforcement new tools to combat money laundering and sanctions evasion
The goals sound great, but things are a bit up in the air atm..
Coinbase pulls their support for it
On January 14th, hours before the Senate Banking Committee was scheduled to vote on the bill, Coinbase CEO Brian Armstrong tweeted out saying that Coinbase was pulling its support for the CLARITY Act.
“We’d rather have no bill than a bad bill,” he posted on X.
Some of his concerns:
- A defacto ban on tokenized equities
- DeFi prohibitions, giving the government unlimited access to your financial records and removing your right to privacy
- Erosion of the CFTC’s authority, stifling innovation and making it subservient to the SEC
- Draft amendments that would kill rewards on stablecoins, allowing banks to ban their competition
The next day, the Senate Banking Committee postponed the vote.
What’s next?
Senate Banking Chairman Tim Scott says he’s optimistic the bill will still pass before the midterm elections and Brian Armstrong remains optimistic that they’ll get to the right outcome.
Fingers crossed! Our industry desperately needs better and more clear regulation, and for better or worse, a lot of the world tends to follow the example(s) set by the USA.
Hopefully they can work this out in a way that doesn’t harm the industry.
I, too, remain optimistic that they will.
Thanks for reading, see you next week with another little learning!