Recently, the United States has taken significant steps toward becoming a global leader in digital assets through two landmark legislative initiatives aimed at establishing a comprehensive regulatory framework for digital assets. The first is known as the Digital Asset Market Clarity Act (the “CLARITY Act”) which was introduced by the House of Representatives with an aim to establish a clear regulatory framework for digital assets. The second is known as the Guiding and Establishing National Innovation for U.S. Stablecoins Act (the “GENIUS Act”) and was signed into law on July 18, 2025, focusing on payment stablecoins. Together, these two pieces of legislation represent a fundamental shift from the previous era of “regulation by enforcement” to a comprehensive statutory framework designed to provide certainty while fostering innovation in the digital asset ecosystem.
Overview of the CLARITY Act
The CLARITY Act focuses on digital assets broadly and establishes a regulatory framework for digital assets by providing clarity on the boundaries of regulation by the Commodity Futures Trading Commission (“CFTC”) and Security and Exchange Commission (“SEC”), defining categories of crypto assets, and regulating intermediaries. The aim of the CLARITY Act is to reduce regulatory uncertainty over digital assets and promote innovation. Currently, the CLARITY Act is a proposed bill that has not yet been signed into law.
The proposed bill would give the CFTC a central role in regulating digital commodities and intermediaries with the SEC retaining authority over crypto transactions in the primary market. As such, the CFTC would have exclusive jurisdiction over antifraud or antimanipulation enforcement in digital commodities and intermediaries handling digital commodities (including crypto exchanges) would be required to register with the CFTC. On the other hand, the SEC would have exclusive jurisdiction over issuers and issuances of investment contract assets, which would include registration and reporting requirements. Furthermore, for digital commodities transacted through an SEC registered broker dealer or securities exchange, the SEC would maintain antifraud and antimanipulation authority.
To provide further clarity and structure to the regulatory framework, the CLARITY Act breaks down digital assets into three distinct categories: (1) digital commodities, (2) investment contract assets, and (3) permitted payment stablecoins. A “digital commodity” refers to a digital asset whose value is intrinsically linked to the blockchain, meaning that the digital asset’s value must rely on the blockchain network’s functionality, including but not limited to use for payments. As such, securities, derivatives, and stablecoins are excluded from the definition of digital commodity. An “investment contract asset” is defined as a digital commodity that can be exclusively held and transferred peer to peer, is recorded on the blockchain, and is sold or transferred pursuant to an investment contract. This means that digital commodities sold in a capital raise context is an investment contract that is treated as a security and therefore subject to SEC oversight. However, once the digital asset is resold in a secondary market transaction, it would generally not be designated as an investment contract asset and would instead be considered digital commodity. A permitted payment stablecoin is a digital asset designed to be used as a means of payment, that is denominated in a national currency, the issuer of which is subject to regulatory and supervisory authority of state and federal agencies, and obligated to repurchase for a fixed monetary value.
In addition, the proposed bill discusses registration and regulation of intermediaries by the SEC and CFTC. The SEC is required to allow digital commodities and permitted payment stablecoins to be brokered, traded, or custodied by broker dealers, alternative trading systems, or national securities exchanges. The proposed bill also discusses registration and regulation of digital asset commodity exchanges with the CFTC, including compliance with core principles.
Overview of the GENIUS Act
The GENIUS Act focuses on payment stablecoins, which are digital assets issued for payment or settlement and redeemable at a predetermined fixed amount. The goal of the GENIUS Act is to protect consumers and ensure the stability of stablecoins. The bill requires 1:1 backing, meaning that issuers would be required to hold one dollar of reserves for every one dollar issued. Permitted reserves are limited to coins and currency, deposits held at insured banks, short-dated treasury bills, and other similarly regulated assets. Further, entities who issue payment stablecoins will be subject to federal licensing requirements, which include subsidiaries of insured depository institutions, federal qualified nonbank payment stablecoin issuers approved by the Office of the Comptroller, and qualified state issuers approved by state regulators.
To further strengthen consumer protection and market transparency, in addition to the backing and issuer requirements, issuers are subject to several disclosure requirements. These include disclosure of redemption procedures, periodic reporting of outstanding stablecoins and reserve composition, and annual audited financial statements. Furthermore, issuers are prohibited from paying interest to stablecoin holders.
Industry Impact
Moving forward, both the CLARITY Act and GENIUS Act are expected to provide greater clarity over digital assets for issuers, exchanges, and investors through the movement toward a statutory framework. For issuers, there will be clearer registration and reporting obligations. For exchanges, there will be oversight from the CFTC and greater compliance burdens. For investors, there will be greater transparency and protection.
Together, the CLARITY Act and the GENIUS Act mark a significant step toward building a comprehensive U.S. framework for digital assets. The CLARITY Act aims to reduce uncertainty by defining asset categories and clarifying the roles of the SEC and CFTC, while the GENIUS Act establishes a tailored regime for payment stablecoins, designed to protect consumers and preserve financial stability. Although questions remain around implementation and potential regulatory overlap, these measures signal a clear shift away from regulation by enforcement and toward a statutory structure intended to balance innovation, investor protection, and market integrity.