CRS Reviews the CLARITY Act
Commentary by Eric Martin and Gage Raju-Salicki
The Congressional Research Service ("CRS") reviewed H.R. 3633, the Digital Asset Market Clarity Act of 2025 (the "CLARITY Act") and detailed how the bill would alter the US legal framework governing digital assets.
According to CRS, much of the bills regulatory framework depends upon the maturity of the particular blockchain underlying a digital commodity. Under H.R. 3633, a blockchain would be deemed "mature" (i) if it is not controlled by any person or affiliated group, (ii) if the asset's value is substantially derived from blockchain use and (iii) if no individual or group holds more than 20 percent of the outstanding units. Issuers could self-certify to the SEC that its blockchain is mature, with the SEC responsible for evaluating certifications. CRS emphasized that this maturity classification would determine whether a token qualifies for qualify for regulation under the CFTC regime or remains subject to SEC oversight.
On SEC jurisdiction, the CRS reported that H.R. 3633 preserves limited SEC authority over digital assets, primarily in the context to fundraising and initial offerings. The bill creates an exemption from the Securities Act registration for issuers of digital commodities on "mature" blockchains, allowing up to $75 million in capital raised over 12 months with the filing of an "offering statement." The exemption applies regardless of investor income or net worth. For non-mature blockchains, issuers would be subject to additional reporting, and the SEC must issue rules within 270 days to govern such offerings.
The bill defines "investment contract assets" and provides they are not themselves securities, even if initially sold via investment contracts. The SEC would retain authority over digital commodity activities of registered broker-dealers and ATSs, provided its rules align with those of the CFTC. CRS noted this shared oversight could lead to regulatory friction.
On CFTC jurisdiction, CRS stated that the CLARITY Act gives the CFTC exclusive jurisdiction over digital commodities and their spot and cash market transactions by registered entities. Digital commodity exchanges ("DCEs"), brokers and dealers must register with the CFTC and comply with "Core Principles," including trade surveillance, customer asset protection, conflict of interest controls and restrictions on proprietary trading.
Only digital commodities tied to mature blockchains (or those from compliant issuers) may be listed for trading. DCEs must publish key asset information before listing. Certification becomes effective after 20 days unless disapproved by the CFTC with written justification. CRS emphasized that this framework centralizes crypto market oversight under the CFTC while extending BSA/AML obligations and allowing regulated financial institutions to engage in digital commodity activities.
CRS explained that the bill creates a provisional registration regime allowing DCEs, brokers and dealers to operate during the transition to full regulation. Applicants would be considered compliant if they protect customer assets and allow CFTC oversight. The CFTC may collect temporary registration fees for four years. DeFi activities, such as validating transactions, are excluded from registration but remain subject to anti-fraud rules. The bill also establishes a framework for qualified digital asset custodians, subject to state or federal oversight.
Commentary
CRS is correct that a large portion of this bill hinges on the maturity of the blockchain protocol in question. As an aside, the CLARITY Act is rapidly evolving ahead of Congress' "Crypto Week," so more changes still are likely to come. With that said, the most interesting points at present, deal with mature blockchain systems; specifically: the self-certification and the "system governance," "impartial system" and "distributed ownership" provisions of the "mature blockchain system" requirements. As an aside, the bill has also changed its retroactivity exemption—now exempting blockchains launched before the date of enactment of the CLARITY Act (notably, this used to be set for "prior to January 1, 2020").
As the language stands currently, a "digital commodity issuer" can self-certify to the SEC that its blockchain system is mature. Moreover, the SEC will have 60 days to review these self-certifications, or otherwise stay the certification for an additional 120 days. And if certification is rebutted, a direct appeal to the US Court of Appeals for the DC Circuit is provided for with de novo review.
Commentary
As summarized above, system governance, impartial design and distributed ownership all get to the heart of decentralization. (For more on defining decentralization, see Miles Jennings' proposed control test). It seems like Congress has, for now, settled on 20 percent token ownership/voting stake being the limit of control a person or group with "unique permission or privilege [with respect to] functionality, operation, or rules of consensus or agreement of a blockchain system or its related digital commodity[.]"
In its current state, the bill does a good job of clarifying a lot of ambiguities—though it will perhaps also create its own unintended ambiguities. There are clear guardrails being provided for industry members here, something industry members have long called for. Having a certification process like this enables regulatory review, while the criteria themselves should present enough barriers to prevent truly centralized entities from utilizing the legislation to their advantage. For protocols, it will be critical to evaluate the seven criteria presented in Section 205(c)(2) of the CLARITY Act to determine whether a protocol meets the majority of these requirements. Even if a protocol was launched prior to whenever this law is ultimately enacted, the protocol will need to, at minimum, meet subsections (A)—(F) of the mature blockchain system requirements.
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