Key facts
- The Clarity Act aims to end the regulatory gray zone for digital assets and provide stable rules.
- The bill prohibits payments for holding stablecoins if they are economically equivalent to bank deposit interest.
- It allows rewards for customer activity, provided they are not equivalent to bank deposit interest.
- The act mandates SEC and Treasury to create rules for decentralized protocol controllers.
- Registered digital commodity brokers, dealers, and exchanges will be subject to Bank Secrecy Act reporting.
- The bill allocates $3 billion to state and local investigators over five years.
Summer Mersinger, CEO of the Blockchain Association and former CFTC commissioner, has defended the Clarity Act against criticism from The Wall Street Journal's editorial board. In a response, Mersinger argued that the Journal's concerns about policy landmines within the bill are misplaced, asserting that the legislation provides much-needed clarity and stability for the digital asset market.
Mersinger highlighted that the Clarity Act aims to end the "regulatory gray zone" left by the previous administration, offering rules that future administrations cannot easily discard. She stated that the bill supports innovations like tokenized stocks and bonds, which could reduce friction and costs in the financial system.
Addressing specific provisions, Mersinger clarified that the act prohibits payments for merely holding stablecoins if such payments are economically or functionally equivalent to interest on a bank deposit. However, it permits rewarding customers for activity, provided these rewards are not akin to bank deposit interest, drawing a parallel to existing credit card and loyalty programs. She characterized the argument against this as protectionism favoring established banks.
Regarding decentralized finance (DeFi), Mersinger explained that Section 10301 is not an exemption but an order for the SEC and Treasury to establish rules for protocols that are "decentralized in name only." These rules would apply where operations depend on discretion rather than transparent code, or where a party can restrict use.
Furthermore, Mersinger countered claims that the bill is weak on illicit finance. She pointed to Section 10201, which brings registered digital commodity brokers, dealers, and exchanges under Bank Secrecy Act reporting obligations, and Title IX, which allocates $3 billion over five years to state and local investigators. She argued that imposing Know Your Customer (KYC) requirements on code itself would effectively prohibit its publication, as software without customers or custody cannot identify individuals.
Mersinger also addressed concerns about tokenized securities migrating to "shadow markets." She emphasized that Section 10505 clearly states that a security remains a security even if it settles on a blockchain, and remains under SEC authority. The provision reaching whoever controls the trading venue is Section 10301.
She criticized the Journal's editorial for framing the same technology differently based on the user – as beneficial when used by banks but as a "shadow market" when used by competitors. Mersinger concluded by stating that the Clarity Act, which has been in development for years and passed the House with bipartisan support, would establish clear rules for intermediaries, leave neutral software unaffected, and allow the market to determine outcomes, aligning with the Journal's typical stance on free markets.