Congressional Action: Clarity Act Progresses With Ethics Guardrails
Senate Republicans released a new draft of the Clarity Act, the long-awaited market-structure bill designed to clarify regulatory jurisdiction over digital assets. The revised text includes a temporary ban preventing top federal officials and their spouses from issuing or sponsoring digital assets, with the ethics provision set to expire in 2029. Enforcement of the ban rests solely with the Department of Justice.
The bill preserves core pro-crypto provisions, including liability shields for non-custodial developers. Lawmakers acknowledge the government-ethics language remains under debate as the measure moves toward a Senate floor finish. The temporary nature of the ethics restriction—rather than a permanent prohibition—reflects ongoing negotiations between Republican factions on the appropriate scope of restrictions on administration officials' crypto activities.
Regulatory Expansion: SEC Signals DeFi Products May Trigger Securities Laws
SEC Commissioner Hester Peirce warned that crypto vaults, onchain lending products, and other asset management tools may fall under U.S. securities laws depending on their structure and operation. The statement suggests the SEC is broadening its interpretation of which decentralized finance mechanisms could be classified as investment funds or adviser services, a position that could significantly expand the agency's jurisdiction over DeFi protocols.
The guidance follows increased SEC scrutiny of yield-bearing crypto products and reflects a regulatory approach focused on functional analysis rather than formal asset classification. Projects offering vaults or lending strategies that resemble traditional fund management may face compliance obligations including registration, disclosures, and ongoing supervision.
International and Enforcement Developments
The Financial Action Task Force (FATF), an international anti-money-laundering watchdog, warned that centralized elements "frequently persist" in decentralized finance and should be regulated accordingly. The FATF noted that nearly every country has yet to apply its cryptocurrency rules and threatened outright bans for platforms that do not comply with its standards.
Domestically, Coinbase settled a Freedom of Information Act lawsuit against the SEC following the agency's admission that it destroyed former Chair Gary Gensler's text messages. The settlement includes a $150,000 payment to Coinbase and reforms to the SEC's record-retention policies. In parallel, the UK Financial Conduct Authority expanded its AI regulatory sandbox to a second cohort, with Anthropic providing Claude AI models to test applications in financial services.