Legislative Progress: Clarity Act Advances With Temporary Ethics Provision
Senate Republicans have circulated a new draft of the Clarity Act, the long-awaited market-structure bill, that includes a temporary ban on federal officials and their spouses from issuing or sponsoring digital assets. The ethics restriction is set to expire in 2029, and enforcement authority rests solely with the Department of Justice. The bill preserves key pro-crypto provisions, including protections for non-custodial developers, marking ongoing effort to establish a comprehensive regulatory framework for digital assets.
The latest draft represents incremental progress toward Senate passage, though lawmakers remain engaged in debate over the scope and mechanics of the government-ethics component. The sunset clause and DOJ-only enforcement structure reflect political compromise balancing crypto industry interests with ethics concerns raised by some lawmakers.
SEC Signals Broader Securities Oversight of DeFi Products
SEC Commissioner Hester Peirce has warned that cryptocurrency vaults, onchain lending products, and similar asset management tools may trigger U.S. securities laws depending on their structure and operation. These instruments could be classified as investment funds or advisers under existing regulatory frameworks, potentially subjecting them to registration and compliance requirements currently applied to traditional financial products.
The guidance signals the SEC's intent to expand securities law application to decentralized finance without waiting for new legislation. This positions structured DeFi products—particularly those offering yield or delegated management—as regulators' next enforcement frontier, adding uncertainty for platforms offering such services.
International Pressure Mounts on DeFi Compliance and Record Preservation
The Financial Action Task Force (FATF), an intergovernmental organization focused on anti-money-laundering standards, has noted that centralized elements "frequently persist" in decentralized finance and should be subject to regulation. The watchdog warned that countries may impose outright bans on platforms failing to comply with its guidance, though it acknowledged that nearly every nation has yet to implement such rules.
In parallel, the UK FCA has expanded its AI regulatory sandbox to test artificial intelligence applications in financial services, with Anthropic providing Claude AI models to participating firms. Separately, Coinbase resolved a Freedom of Information Act dispute with the SEC after the agency acknowledged destroying former Chair Gary Gensler's text messages, securing a $150,000 settlement and reforms to the SEC's record-retention policies. These developments underscore regulators' evolving technical capabilities and accountability measures affecting crypto firms.