US House Passes CLARITY Act to Define Crypto Oversight, Split SEC and CFTC Roles

After nearly a decade of regulatory turf wars and policy-by-lawsuit, U.S. lawmakers are moving toward a simpler premise: before Washington can police crypto, it has to define what crypto is. The House’s passage of the CLARITY Act in July 2025 marks a bid to replace enforcement-driven ambiguity with statutory ‘definitions’ that could reshape where exchanges operate, how products are designed, and which regulator is in charge.

The shift matters because the crypto market has long lived inside an American gray zone. In 2017, the Securities and Exchange Commission (SEC) said DAO tokens could be ‘securities’ under U.S. law. A year later, the Commodity Futures Trading Commission (CFTC) argued Bitcoin (BTC) fit the category of a ‘commodity.’ Both agencies looked at the same market and asserted overlapping authority, leaving companies to infer the rules through subpoenas, settlements, and courtroom outcomes.

That approach produced two predictable results: firms built offshore to reduce legal exposure, and regulators effectively made policy through selective enforcement. In the process, legal risk became a cost of doing business—and, for many startups, a reason to do business somewhere else.

The CLARITY Act attempts to reverse the sequencing. Instead of asking first how to control crypto, it asks a more foundational question: what is being regulated? The bill’s core architecture draws a line between ‘investment contract assets’ overseen by the SEC and ‘digital commodities’ overseen by the CFTC. The distinction is designed to map onto how networks function in practice—centralized issuance and profit expectations on one side, sufficiently decentralized networks on the other.

Under the framework, assets on broadly distributed networks—often exemplified by Bitcoin (BTC) and Ethereum (ETH)—would fall under the CFTC’s digital commodity regime. Tokens whose value depends on a central issuer promising returns would be treated as investment contract assets under the SEC. Importantly, the bill sketches a pathway for an asset to migrate from SEC jurisdiction to CFTC jurisdiction as a network becomes more decentralized over time—an acknowledgement that tokens can evolve beyond their initial launch conditions.

The bill also proposes a structural reset for crypto trading venues. Exchanges listing digital commodities would register with the CFTC; venues listing investment contract assets would register with the SEC. Platforms trading both categories would either register with both agencies or separate operations into distinct legal entities. For large global exchanges, that is not a technical footnote—it could force changes to corporate structure, licensing strategy, and product segmentation in the U.S. market.

The most politically delicate sticking point, however, has been stablecoins—specifically whether issuers should be allowed to pay interest-like returns. Early Senate drafts reportedly leaned toward a blanket prohibition, reflecting concerns from the banking sector that yield-bearing stablecoins could compete with insured deposits without comparable safeguards. Crypto firms pushed back, arguing that an outright ban would strip stablecoins of a core use case and accelerate migration to offshore platforms.

A compromise proposal released in March landed in the middle: banning ‘passive interest’ simply for holding a stablecoin, while permitting rewards tied to real activity such as payments and transfers. Yet the compromise left a key ambiguity intact—where, exactly, the line sits between activity-based rewards and yield that functions like interest. That definitional gap matters because until regulators clarify it, companies cannot confidently design compliant products. In effect, critics argue, uncertainty is not eliminated so much as relocated—from pre-legislation ambiguity to post-legislation rulemaking.

Timing is another pressure point. Senate Banking Committee Chair Tim Scott has signaled a goal of late-April markup, following the Easter recess. The legislative math is straightforward: clear committee action in April could open a path to floor votes in May or June. Once midterm election campaigning intensifies in the second half of the year, contentious bills tend to lose oxygen; after the August recess, legislative bandwidth typically narrows further until after the November elections. If the April window closes, proponents warn the next realistic opportunity could slip well into 2027.

While Washington debates, other jurisdictions are already converting policy into operational rules. The European Union’s MiCA framework is in force, Hong Kong has begun issuing stablecoin-related approvals, and Russia is moving forward with mandating the digital ruble in stages starting in September. For global capital, the direction of travel is consistent: ‘clarity’ attracts liquidity, talent, and domiciles.

If the CLARITY Act becomes law, the ripple effects would extend beyond the U.S.—including to South Korea. First, clearer legal footing for dollar stablecoins, paired with the permissibility of certain activity-linked rewards, could accelerate the spread of dollar-denominated stablecoin rails in cross-border payments. That would increase competitive pressure on won-based digital asset initiatives and domestic payment ecosystems.

Second, regulatory certainty tends to pull corporate headquarters, licensing entities, and high-value jobs. If the U.S. offers a stable playbook, some firms that previously located in Singapore, Hong Kong, or Dubai to avoid U.S. ambiguity may reconsider. Korean crypto companies—especially those seeking global distribution—would face the same incentive structure: move toward jurisdictions with predictable rulebooks.

Third, a U.S. statutory framework would become a global ‘baseline’ alongside MiCA. For regulators in Seoul, that raises the cost of delay. Without a coherent domestic framework, South Korea risks ending up in a reactive position—importing standards built elsewhere rather than shaping them to local market structure and consumer protection priorities.

The debate also highlights a deeper philosophical split in global regulatory thinking. The Bank for International Settlements (BIS) has emphasized ‘control’—treating exchanges more like banks, with capital requirements and liquidity buffers. CLARITY emphasizes ‘classification’ first—define the asset and assign jurisdiction, then build supervisory layers on top. The two approaches are not mutually exclusive; in theory, prudential rules can be added once legal categories are settled. The question is sequencing: can a market be safely regulated if lawmakers have not agreed on what, precisely, they are regulating?

Even if CLARITY resolves jurisdiction, it would not instantly eliminate structural risks in exchange-run yield products—often marketed as “earn” accounts—where customer deposits may be rehypothecated into loans and leveraged strategies. Clearer lines between the SEC and CFTC do not automatically create balance-sheet buffers or reduce maturity mismatches. That leaves the next policy question hanging: if bank-like risks exist in parts of crypto, should bank-like regulation follow—and if it does, how can regulators avoid suffocating innovation while protecting consumers?

For now, the CLARITY Act represents Washington’s clearest attempt in years to put ‘definitions’ ahead of discipline. Whether the Senate can translate that ambition into law will help determine not only the future shape of U.S. crypto oversight, but also how quickly global market structure—and Asia’s competitive landscape—reorients around the next major center of regulatory certainty.