Revised CLARITY Act Defines Non-Decentralized DeFi Protocols

The revised CLARITY Act defines non-decentralized finance trading protocols as entities whose rules or operations can be materially altered by a person or coordinated group. This classification subjects such controllers to existing securities, commodities, and anti-money laundering requirements in the United States.

The bill text posted on Senator Cynthia Lummis' website clarifies that protocols where controllers can restrict users or where transactions are not governed solely by transparent code fall under this definition. The measure aims to distinguish these entities from fully decentralized systems that operate without central oversight.

Regulatory Agencies Gain Specific Mandates

The proposal directs the Securities and Exchange Commission and Commodity Futures Trading Commission to develop activity-based rules for affected controllers. These rules will cover registration, conduct, disclosure, recordkeeping, and supervision standards.

The Treasury Department will determine how existing Bank Secrecy Act obligations apply to these controllers. The legislation explicitly states that software and distributed ledger systems do not require registration in their own capacity. Participation in security councils does not automatically establish control over a protocol.

Senate Vote Faces Procedural Hurdles

A procedural Senate vote is scheduled for September 15. The measure requires 60 votes to advance, necessitating support from Democrats. Cointelegraph reports that negotiations continue over ethics, anti-money laundering protections, and stablecoin rewards.

Democratic Senator Ruben Gallego warned against holding a vote before resolving disputes involving ethics and stablecoin yield. He cautioned that a fast vote may not yield the desired legislative result. The ethics section of the new text remains largely unchanged from previous versions.

Industry Leaders Support Legislative Progress

Crypto Council for Innovation CEO Ji Hun Kim called the upcoming vote a pivotal moment for digital assets. He stated that the US needs a framework combining consumer protections with business conduct standards. This position was shared in a statement provided to Cointelegraph.

Coinbase CEO Brian Armstrong told CNBC that the CLARITY Act is ready for a yes vote. He indicated that major issues raised by Coinbase have been resolved, although ethics negotiations remain active. Armstrong noted that if the legislation fails, regulators could pursue rulemaking using existing authority.