The hard truth is that the Clarity Act is an anti-crypto bill

After years of stalled bills, misguided enforcement, and catastrophic collapses, almost any comprehensive crypto legislation began to look like progress. But Clarity is turning that hunger for progress into a political trap, argues Berkeley Law lecturer Hermine Wong.

Now that congressional action on the Digital Asset Market Clarity Act has been punted until mid-September, there has never been a better time to ask whether the Clarity Act is actually good for crypto.

In Washington, the “Clarity Act” and the “crypto bill” have become interchangeable . The assumption is that if you support crypto , you support Clarity; if you oppose C larity, you oppose crypto.

That framing is remarkably convenient. It is also wrong.

For years, the crypto community endured congressional paralysis as a parade of crypto bills stalled out. (Let’s observe a small moment of silence for the Token Taxonomy Act , the DCCPA , and FIT21 , to name a few inhabitants of the legislative graveyard.)

Throughout the legislative paralysis, the crypto community survived the Gensler era of enforcement actions that should have never been brought , as well as the catastrophic collapses of Celsius, Voyager, and FTX, all made worse because the laws were insufficient to govern the industry .

At some point, almost any comprehensive bill gave the illusion of progress.

But if we look past the name, Clarity isn't really a bill about enabling crypto, the technology. It is a bill about enabling crypto middlemen.

Crypto was supposed to remove middlemen

Crypto’s origin story begins with the Bitcoin whitepaper , published amid the 2008 financial crisis. “Trusted third parties,” i.e., middlemen or intermediaries, may have once been necessary, but they are also points of failure. The combination of cryptography with the ubiquity of the internet could safely replace those points of failure with peer-to-peer transactions.

That was the point. Securely enabling a peer-to-peer financial system through technology.

Yet, reading the text of the ClarityAct, you’d be forgiven if you thought being pro-crypto meant being pro-middlemen. The legislation is built around exchanges, brokers, custodians and other intermediaries.

In my review, only 2–4% of the bill’s language focuses on the underlying technology, while 44–77% focuses on intermediaries. (The figures vary across the House-passed bill , the Senate Agriculture Committee draft , and the Senate Banking Committee draft .)

It’s as if Congress were to propose its first “medicine” bill. But rather than establishing any requirements for proof of effectiveness, testing and safety, or labeling, Congress spent most of its ink on how the Walmarts and CVSs could sell to us.

Just as focusing on the Walmarts and CVSs would not address the safety and efficacy of the underlying medicine, regulating crypto intermediaries is not the same thing as establishing a legal framework for the technology.

So if the industry’s greatest legislative unlock is to design crypto regulations around the business models of crypto middlemen, shouldn’t we ask how we got here?

Follow the political money

The crypto industry made enormous headlines during the 2024 election cycle, raising over $200 million. Crypto super PACs were the biggest corporate super PACs and they altered races with their money.

The $40 million to defeat Sherrod Brown and the $10 million to defeat Katie Porter became exhibits A and B for crypto's political muscle.

But the money never represented a vast grassroots uprising of millions of crypto donors. A concentrated group of about 40 crypto businesses and wealthy individuals supplied all the funds. Three businesses alone (Coinbase, a16z, and Ripple) accounted for over 80% of the funds raised.

Another way of putting this is that the industry’s largest intermediaries funded the political machine.

Now we are seeing the result of that bargain.

The perfect political failure

After the 2024 election, the Republicans controlled both chambers of Congress and the White House. Yet, despite this unified control and the full-throated support of President Trump, the Republicans have failed to pass a crypto market structure bill. The crypto bill has already blown through the July 4th then the pre-August recess timelines its advocates once touted.

When Congress returns in mid-September, both chambers have a lot to do with only 14-16 legislative days left before the midterms, including reconciling their respective continuing resolutions to avoid a government shutdown. Not the Clarity Act.

Nevertheless, Republicans have succeeded in avoiding any responsibility for its failure. This should be surprising. Crypto super PACs spent over $100 million to elect a pro-crypto Congress in 2024. You would expect that they would hold those they elected responsible. If this were the workplace, they certainly would.

Instead, all the Republicans have done is schedule a procedural vote on whether the Senate will even consider the bill. And that procedural vote is widely considered doomed on the congressional math alone.

What’s remarkable is how Republicans will use this procedural vote: both to evade responsibility for failing to pass Clarity, and as a scorecard to help “direct” the crypto super PACs more than $190 million war chest against Democrats, who have been in the minority throughout this Congress.

Ignore who controls the committees. Ignore who controls the congressional calendar. Ignore who controls the House, Senate, and White House.

My bet here is that the crypto super PACs will be just fine with this. Because while their talking points have said they are bipartisan , in 2024, Fairshake (the biggest crypto super PAC), only targeted Democrats for their attack ads spending . $0 was spent on attack ads against Republicans.

The democrats could change this