The Take Away: What Crypto Legislation Does
A plain-English look past the politics, into the mechanics of GENIUS, Clarity, and the Anti-CBDC act.
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Last week, the House passed three major crypto bills: the GENIUS Act, which regulates stablecoins; the Digital Asset Market Clarity Act, which outlines which assets should and shouldn’t be subject to securities laws, and the Anti-CBDC Surveillance State Act, which prohibits the creation of a U.S. central bank digital currency. The GENIUS Act was signed into law Friday, making it the first significant federal legislation to govern crypto markets.
The politics leading up to these votes were messy, with delays and partisan maneuvering, and the legislative fight is far from over. The Senate now holds the pen, and a draft bill published yesterday looks very different from what the House passed. But with Congress headed into August recess, it’s a good time to step back from the drama and look at what these bills actually say, and what that mean for users, entrepreneurs, and the industry at large.
The Anti-CBDC Surveillance State Act
The simplest of the three bills, the Anti-CBDC Act, bans the Federal Reserve from issuing a central bank digital currency or offering retail accounts or services to individuals. Supporters of the bill frame CBDCs as surveillance tools that would give the government excessive control over personal finances. Advocates for CBDC’s, on the other hand, argue that they could promote financial inclusion and enhance the safety of the banking system.
The bill is only about a page long and lists a series of simple prohibitions on the Federal Reserve, effectively stating that it cannot issue or study a central bank digital currency. The bill’s brevity is part of what makes it so controversial. Critics say its sweeping language could stifle innovation, potentially preventing the Fed from even researching new payment technologies or supporting private sector innovation. Carole House, a senior fellow at the Atlantic Council, warned that the bill could even restrict existing systems like FedNow or limit how the Fed interacts with stablecoin issuers and banks, calling it “unfortunate” that the bill “is unclear and could upend future financial innovation, refusing to grant the same nuance in CBDC policy that cryptocurrency also deserves by banning even research or experimentation into forms of public money to accompany private money innovations.”
Because of its broad language and sharp partisan undertones, this bill faces an uphill battle to pass the Senate, where 60 bipartisan votes are needed for it to prevail.
The Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act
The second bill of note is the GENIUS Act that Aaron Covered on Monday.
Now law, GENIUS establishes the first federal framework for stablecoins. At its core, the law requires U.S. stablecoin issuers to hold 1:1 collateral reserves in cash, short-term Treasuries, money market funds, or central bank reserve deposits. It mandates regular audits for large issuers with more than $10 billion in circulation to verify those reserves, while smaller issuers must publicly disclose reserve information on their websites. Oversight will be shared between federal and state regulators: the large issuers fall under the Office of the Comptroller of the Currency, while smaller issuers can be regulated at the state level if states meet minimum standards.
What’s most controversial about the bill, ultimately, is what’s not in it. Several prominent Democrats pushed for conflict-of-interest rules to prevent President Trump or his family from issuing stablecoins, but that never made it in. Instead, the law prohibits most federal employees from issuing stablecoins under existing ethics rules but stops short of extending that to the executive branch’s top ranks. Some Democrats also pushed for FDIC insurance on stablecoin deposits, but that wasn’t added, either.
Several provisions have also raised concerns within the crypto community. For example, the bill prohibits stablecoin issuers from paying stablecoin holders yield, whether that is cash, tokens, or some other equivalent asset. There may be some loopholes, but ultimately, that is something that only a judge can decide. You can refer to Monday’s analysis for more details there.
It also brings stablecoin issuers under the Bank Secrecy Act, requiring them to collect customer data and monitor for suspicious activity. But those provisions are “not precise,” says the Cato Institute’s Director of Financial Regulation Studies Jennifer Schulp. According to Schulp, there is a risk that the BSA provisions are interpreted to require stablecoin issuers to monitor not just the people they directly issue their token to, but all people that hold their token generally, should an administration hostile to crypto take over FinCEN. “You could have a friendly regime, but you could also have an unfriendly regime,” Schulp says. Notably, the DOJ has reportedly taking this position with Tether in the past.
None of these changes will happen overnight. Issuers have 18 months to comply, while the Treasury has a year to decide which foreign jurisdictions have comparable regulatory standards—critical for determining whether major foreign issuers like Tether can operate in the U.S. Any noncompliant stablecoins must be delisted by exchanges and phased out by payment applications within three years from the day the law was signed.
The Digital Asset Market Clarity Act
Finally, the third bill, the House’s Digital Asset Market Clarity Act (“Clarity”), attempts to write rules of the road for the rest of blockchain-based assets. It creates a new “safe harbor” framework to exempt sales of certain assets from the securities laws where decentralized blockchains are not effectively controlled by any one entity.
For these exempt sales, it outlines some basic disclosure and registration requirements, then sets deadlines by which the Securities and Exchange Commission and Commodities Exchange Commission must provide additional detail. It also requires various agencies to produce reports on various areas of the market, like DeFi, NFTs, and financial literacy, which would ostensibly inform additional rulemaking down the line.
“I think it does hand spot markets to the CFTC, but that’s not the most important part of what it’s doing,” says Schulp. “One of the biggest challenges in the crypto space for many years now has been determining whether or not the securities laws apply, because the securities laws are difficult to comply with…drawing a clear line there is the most important thing that Clarity does.”
Clarity evaluates blockchains by a “maturity” test, which requires that an asset's market value is derived from the use of its underlying blockchain, that its tokenomics are public, that blockchain participants have adequate say over the blockchain’s development and growth, that the blockchain’s project is open source, and that there is a distribution of control. These assets are exempted from securities laws.
But the exemptions listed in Clarity are extensive. NFTs, collectibles, airdrops, and DeFi applications are exempted from the framework entirely. That worries critics like Carole House, who argues the carve-outs create loopholes for regulatory arbitrage and undermine consumer protections. “The carve-outs in [Clarity] are unfortunately wide enough that they are ripe for abuse,” she said. Crypto advocates see things differently, arguing these provisions are essential to preserve innovation and avoid forcing intermediaries into decentralized systems. “For a lot of us in the crypto community, introducing intermediaries into DeFi is a nonstarter,” said Kristin Smith, president of the Solana Policy Institute.
In addition to creating a new class of assets, Clarity would also create a new category of marketplace, the “digital commodity exchange” which would be allowed to facilitate trades in the newly exempt assets it creates. These could become a flashpoint in future discussions as well, should the bill ever move closer to becoming law.
What Happens Next
After GENIUS became the first federal crypto law last Friday, the fate of the other two bills remains an open question, and the path to comprehensive crypto regulation remains long and uncertain. The Senate Banking Committee has released its own discussion draft for market structure, and it takes a markedly different approach by scrapping Clarity’s “maturity” framework in favor of a concept called “ancillary assets,” a category designed to cover most crypto tokens unless they function like traditional debt or equity instruments. NFTs and collectibles would also be excluded.
The differences between the House and Senate visions are stark, and reconciling them will take time. If the Senate passes a substantially different bill, the House would have to vote again. And the Banking Committee draft is incomplete in that it doesn’t cover CFTC oversight, which falls under the Agriculture Committee, whose own proposal is expected this fall.
All of this means that, despite optimism from the White House about getting a bill by September, most observers see that as unlikely. “It’ll take quite a lot to get this through the Senate by the end of the year,” said Smith. “Market structure is on the roadmap, but the timeline is more drawn out.”
For now, GENIUS stands as the first meaningful piece of crypto legislation in U.S. history, while the other two bills remain in limbo. Whether they become law—or transform into something entirely different—will depend on a Senate that has shown little appetite for moving quickly on crypto.
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"I'm pretty jaundiced about what the federal government is doing right now, at any level, Aaron. I get that this isn't a popular view among the 'Cyber Monday' crowd, but my blockchain goals never really clicked with most participants, who seemed stuck in a greed mentality. I just hope it turns out to be fair and accessible for everyone. Honestly, I think most of the American public has no clue about the issues you talk about."