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The CLARITY Act is Coming Up for a Senate Vote in September

Cryptocurrency

The CLARITY Act has passed the House and the Senate intends to take it up in September. It is a confusing bill, full of financial jargon that makes it difficult to understand exactly what this bill is about, besides making political elites – including Donald Trump – richer, at the expense of the rest of us.

If this bill passes through Congress, we’ll one day look back on its enactment as a pivotal moment in time — much like we point to the Gramm-Leach-Bliley Act of 1999. That legislation dismantled Glass-Steagall’s firewall between commercial and investment banking, allowing banks, brokers and insurers to combine into mega financial “supermarkets” — all in the name of “innovation.”

When the predatory mortgages-fueled housing bubble burst, the “innovators” who amassed their wealth on the backs of vulnerable families required massive taxpayer bailouts. As crypto enters the mainstream financial system, we can expect that, as usual, the oligarchy will take all of the upside and outsource the downside – the inevitable crypto crashes and bailouts – to the working class. The CLARITY bill provides little in the way of regulatory oversight while setting the stage to enable and condone ethically problematic crypto business activities by the Trump administration, organization, and family – ones that raise unprecedented concerns about presidential conflicts of interest, corruption, and the abuse of public office for private gain. [AFR]

How Did We Get Here?

The rise of oligarchic power is a defining feature of our era. Through a combination of wealth accumulation, regulatory capture, and media influence, billionaires have increasingly displaced the role of public officials in shaping policy. This isn’t merely an American phenomenon — it’s global. In Russia, oligarchs are literal power brokers. In the U.S., lobbying, Super PACs, and stock market manipulation have created a reality where public good is often subordinated to shareholder interests.

Why does this feel like a replacement of politics? Because oligarchs do not require votes or public support. Their power is rooted in capital and connections, not democratic legitimacy. During crises — from the COVID-19 pandemic to the war in Ukraine — billionaires often act faster and with more visible impact than governments. Elon Musk can launch satellites to help Ukraine or influence Twitter discourse globally, while state diplomats fumble over press releases. This inversion of power creates an illusion, and perhaps a reality, that global affairs are decided in boardrooms, not parliaments.

Cryptocurrency has added a new dimension to this transformation. What began as a libertarian experiment in decentralization has become a multi-trillion-dollar shadow economy, often existing outside state control. While central banks issue currencies, the crypto ecosystem creates parallel financial networks that don’t require state approval, Know-Your-Customer regulations, or geopolitical allegiance.

This undermines bureaucratic structures at a fundamental level. Taxation, welfare distribution, monetary policy — pillars of state functionality — become harder to manage. Crypto doesn’t respect borders, and its decentralized architecture erodes the monopolistic power of the state to control money. Central banks are now exploring Central Bank Digital Currencies (CBDCs) in an attempt to keep up, but the genie may already be out of the bottle.

Moreover, some of the most powerful crypto players act as states unto themselves. Binance, Coinbase, and other exchanges regulate their own ecosystems, negotiate with nation-states, and influence monetary policy through sheer volume. This isn’t just a new industry; it’s a new sovereignty.

What is Crypto?

Fiat currency is legal tender that’s issued and backed by a government. It derives its value from a government and an economy, and its stability largely depends on those two factors. When a country goes through an economic crisis, it may see the value of its fiat money plummet through hyperinflation. The dollar, the yen, and the pound are all examples of fiat currency, backed by the full faith and credit of the governments whose central banks control the money supply. Through monetary policy, the central banks determine the amount of money in circulation and when to increase or decrease the supply.

Cryptocurrency is a digital currency issued on a blockchain network. A cryptocurrency’s value can be based on a variety of factors, including its popularity. Crypto is highly volatile and can lose value rapidly because it is backed by the full faith and credit of ABSOLUTELY NOTHING. As Warren Buffett said in 2020, “Cryptocurrencies basically have no value. You can’t do anything with it except sell it to somebody else”. This is called the “Greater Fool Theory”, which posits that it doesn’t matter if an asset is risky, has a massively inflated price, or is worthless. All that matters is that someone else is willing to buy it from you for more than you bought it. Because popularity is a core determinant of value, crypto’s value is speculative and based on ‘vibes’, much like Cabbage Patch dolls, Beanie Babies, Labubu – or even Dutch tulips, which are considered the first speculative bubble in recorded history.

The most meaningful use case for crypto—the one that we can use if we are trying to ascribe the least scammy motives to crypto people—is that they will one day create a global monetary system that sits completely outside of the control of governments. Is this a desirable thing? Though it is possible to conjure up use cases when this seems good (“the resistance supporters abroad must be able to stealthily funnel resources to the brave resistance fighters inside the dictatorship!”), the real answer to this is “no,” especially not if you believe in things like “financial regulation to protect consumers” and “responsible monetary policies carried out by central banks in order to stave off depressions and whatnot.”

Major banks have now decided to allow crypto to be used as collateral for loans, including mortgages. This sets the stage for a rapid collapse in crypto prices to spread its harm much more broadly throughout the financial system. Trump signed an executive order last week to make it easier for your 401-k to be invested in crypto, which could lead to a complete wipe-out of your retirement savings, given the volatility of the crypto market. We are being forced into a crypto future in which bills like the CLARITY Act give the appearance of regulation while actually creating an industry-friendly environment that benefits the oligarchy at the expense of the rest of us.

Which Brings Us Back to the CLARITY Act

The CLARITY Act is not a consumer protection bill—it is a market structure bill designed to move oversight of most digital assets from the Securities and Exchange Commission (SEC) to the Commodity Futures Trading Commission (CFTC), which lacks a consumer protection mandate.

According to Senator Elizabeth Warren, any regulatory framework for the crypto industry, in which investors can use real money to purchase virtual or digital assets and trade them on decentralized, unregulated blockchain technology, must include the framework set up by “the securities laws that have served as the bedrock of our capital markets for nearly 100 years,” said Warren—but the CLARITY Act includes language that would allow “non-crypto companies to tokenize their assets to evade the SEC’s [Security and Exchange Commission] regulations.”

“Under the House bill, a publicly traded company like Meta or Tesla could simply decide to put its stock on the blockchain and POOF! it would escape all SEC regulation,” said Warren.

Americans for Financial Reform (AFR) also spoke out against the CLARITY Act’s provision on Tuesday, saying the bill would “create a race to the bottom and fuel fraud and financial instability.”

With the crypto market growing 15-fold over the last five years, with a $3 trillion market capitalization in 2024, risks to “investors, our financial system, and our national security have also sharply increased,” Warren warned.

Warren also called for legislation that ensures instability in the crypto market won’t “infect” the larger financial system by guaranteeing that taxpayers are not on the hook for “risky crypto bets,” and that includes commonsense rules to protect national security and fight crime within the industry.

While the CLARITY Act includes some consumer-friendly provisions that help clarify the rules of the road for consumers and the crypto industry, the potential risks for consumers, investors, and financial safety and stability are substantial – these are just a few of the risks, which are discussed in great detail in the this Consumer Reports article. Senate Democrats also released a list of problems with this bill:

  • Fails to rein in presidential crypto corruption. Crypto now comprises the majority of President Trump’s wealth. Since last year, he and his business partners have received at least $620 million in payouts from his crypto tokens alone, not including his other crypto investments. Congress should stop the most egregious presidential financial corruption in the history of our nation
  • Takes a hammer to our $120 trillion capital markets by shrinking the SEC’s authority and risking Americans’ retirement savings and stock investments. The CLARITY Act would create a new “ancillary asset definition” —which is not limited to crypto— that allows companies to sell assets to investors without any of the protections afforded by federal and state securities laws. Even for Americans who invest in non-crypto companies, this would mean exposing their retirement accounts and investments to greater volatility while stripping away existing federal and state enforcement tools to protect and help investors who get scammed.
  • Increases the risk of a financial meltdown. The CLARITY Act would bring crypto activities firmly within the taxpayer safety net, threatening the Deposit Insurance Fund, the safety and soundness of the banking system, and the ongoing availability of the critical non-crypto banking services that businesses and households rely on.
  • Fails to address money laundering and other national security risks. The CLARITY Act fails to address the methods used by criminals, rogue nations, and terrorists to launder billions of dollars to fund illicit activity, such as selling arms and drugs, trafficking human beings. These activities would be taking place at the banks where YOUR money is held, indirectly exposing it – and you – to the inevitable fallout from these types of transactions.
  • Fails to provide crypto investors with enforceable protections.  The CLARITY Act handcuffs the Securities and Exchange Commission, preventing it from proactively protecting people against fraud. Regulators would have to wait until after investors have already been harmed to act — potentially after a company has collapsed and life savings have vanished. We’ve seen this before. FTX collapsed because insiders illegally operated the exchange, controlled customer funds and traded against their own clients. The CLARITY Act does nothing to address that and, in fact, actually creates space for similar schemes. This won’t just affect consumers in crypto markets — the CLARITY Act will undermine traditional securities markets by creating loopholes that traditional firms can use to evade our existing securities laws..

Urging Congress to vote against the CLARITY Act, AFR warned that the “massive deregulatory bill” is backed by “a gusher of campaign cash and lobbying muscle from ultrawealthy venture capital firms and crypto billionaires,” with Trump set to “gain the most from this giveaway” after making $1.2 billion in crypto just in the past few months.”

“CLARITY (along with related crypto bills being considered) is a custom-built framework that gives him and his billionaire allies a green light to manipulate financial markets,” said the group, “while working families are left holding the bag.”

The bottom line is that the CLARITY Act is a Republican-led effort to legitimize fraud and grift, privatizing the upside and offloading the downside to the working class. The time to speak out is NOW, before the CLARITY Act comes up for a vote when Congress returns from the August recess.

According to Indivisible, the CLARITY Act is “a bill disguised as “crypto regulation” but actually serves the billionaires and bad actors at the center of today’s crypto chaos. This bill doesn’t protect consumers, doesn’t close money laundering loopholes, and does nothing to stop the biggest threat of all: Trump’s crypto-fueled bribery machine. Indivisible National posted a form that makes it easy (even for busy people!) to contact your Senator to tell them to vote NO on the CLARITY Act.

References and Resources (In no particular order….)

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