A16z Crypto: Explanation of the "CLARITY Act" for Crypto Entrepreneurs

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Author: @milesjennings

Translation: Jiahui, ChainCatcher

The Senate Banking Committee has just advanced cryptocurrency “market structure” legislation (i.e., legislation regarding market division, regulatory responsibilities, and trading rules) through bipartisan cooperation, marking a historic moment for the crypto industry.

Why is this happening? Because the Digital Asset Market CLARITY Act will finally establish clear rules for blockchain networks and digital assets.

Over the past decade, the United States has lacked clear regulation, leading to market distortions, suppressed innovation, and exposing consumers to significant risks. CLARITY will end this situation.

The 1933 Securities Act established investor protection mechanisms, supporting a century of capital formation and innovation in the U.S. The significance of CLARITY is similar—it represents a once-in-a-lifetime shift in the American financial regulatory landscape, bringing enormous opportunities.

With today’s passage through the Senate review, this foundational legislation, crucial to the entire crypto industry, is closer than ever to becoming law.

Whether it’s startup founders, consumers, or large traditional financial institutions and investors migrating onto the chain, everyone will benefit.

Next, bills from two congressional committees will be merged into a comprehensive bill, which will be voted on by the full Senate. After passing, it will be sent to the House for approval, and if successful, to the White House for the President’s signature.

Why the U.S. needs CLARITY now

Over the past decade, the crypto industry has continuously expanded, but the U.S. has never had a complete regulatory framework. Regulators have had to cobble together existing laws to oversee the industry, but this approach has been a total failure.

It has not only caused legal confusion and inconsistent enforcement but also led to serious overreach and abuse of authority by government agencies.

This regulatory uncertainty has not only hindered innovation but also created fertile ground for bad actors. In the highly publicized negative news of the past decade in crypto, malicious actors could easily exploit regulatory gaps to push products, exploiting consumers.

Meanwhile, responsible builders face the dubious alternative of “enforcement instead of legislation.”

This uncertainty has pushed crypto development overseas. When the U.S. cannot provide space for innovation, entrepreneurs will look elsewhere, including jurisdictions with more refined regulatory systems.

The EU’s Markets in Crypto-Assets Regulation (MiCA) and the UK’s crypto regulations are two examples of the U.S.’s lag.

Fortunately, no other jurisdiction currently offers a better regulatory solution for American innovation. But tailored regulatory systems will eventually attract entrepreneurial activity and concentrate economic value and jobs in those regions.

Imagine if Amazon, Apple, Facebook, Google, Microsoft, Netflix, NVIDIA, and Salesforce had all been founded outside the U.S.—what would the American economy look like?

Therefore, if the U.S. can provide clarity for builders, domestic innovation will greatly benefit. The GENIUS Act, passed in July 2025 (the “Guiding and Establishing U.S. Stablecoin Innovation Act”), is a typical example.

GENIUS established a regulatory framework for stablecoins (digital assets pegged to fiat currency, usually anchored to the dollar), fostering a new model: open monetary infrastructure.

Once enacted, it will bring unprecedented growth and adoption, benefiting the U.S. economy and the long-term dominance of the dollar.

When the legal framework is designed to both promote innovation and protect consumers, the U.S. can lead the trend, and the world will benefit as well.

Entrepreneurs and early users who believe in crypto’s promise, regardless of external opinions, should have a clear regulatory framework to realize their visions.

They also need a framework that recognizes the potential of blockchain networks to drive a significant and innovative technological platform transformation. This transformation should go beyond the speculative applications spawned by poor policies, enabling development outside the initial financial scenarios (which are already covered by current U.S. regulations).

CLARITY is specifically designed to establish such a clear framework.

How did we get here

The content of the CLARITY Act is not entirely new. Many concepts and principles are derived from existing commodity and securities laws. The bill has evolved from previous legislative iterations, including two “market structure” bills originating from the House:

The 2024 “21st Century Financial Innovation and Technology Act,” or “FIT21” (HR 4763); and the 2025 “Digital Asset Market CLARITY Act” (HR 3633).

Similar to the current Senate bill, FIT21 and the House version of CLARITY both attempt to provide a pathway for blockchain networks to:

Launch blockchain networks and digital assets safely and effectively in the U.S.;

Clarify the regulatory division between the SEC and CFTC in the crypto space, determining whether digital assets are securities or commodities;

Ensure oversight of crypto exchanges;

Regulate crypto trading to further protect American consumers.

Two years ago, FIT21 passed with overwhelming bipartisan support (279 votes in favor, 136 against, including 71 Democrats supporting).

The House version of CLARITY passed in July 2025 with even higher bipartisan support (294 in favor, 134 against, including 78 Democrats).

Together, these bills sent a strong signal to the Senate: accelerate crypto market structure legislation.

The Senate version of CLARITY builds on the bipartisan momentum in the House and has made improvements in several key areas (see below). It has been in progress in the Senate for several years, with the fastest pace in the past year:

June 2022, Senators Lummis and Gillibrand first proposed the “Lummis-Gillibrand Responsible Financial Innovation Act,” the first bipartisan legislative proposal aimed at establishing a comprehensive regulatory framework for crypto.

July 2025, the Senate Banking Committee (which oversees the SEC) released a draft bill within its jurisdiction, merging and unifying the ideas from the “Lummis-Gillibrand Act” and the House version of CLARITY.

They solicited feedback and legislative solutions, seeking a balance between innovation, financial stability, and consumer protection.

September 2025, based on feedback received, the Senate Banking Committee released a second discussion draft.

January 2026, the committee released another iteration reflecting months of bipartisan negotiations.

Also in January 2026, the Senate Agriculture Committee released and advanced its own market structure legislative draft within its jurisdiction.

Today (May 14, 2026), the Senate Banking Committee has just advanced the relevant portion of the CLARITY bill during its “markup” session.

Why CLARITY matters: Networks are not companies

For over a century, building companies has been the main driver of American innovation. This path is well-established: entrepreneurs raise funds, start businesses, and generate profits to reward shareholders.

U.S. law has refined this model, defining responsibilities, emphasizing transparency, and aligning incentives to foster trust in founders and operators.

This framework is suitable for building companies but not for building networks.

Existing legal frameworks assume control by a manager and require this control to persist long-term. But networks have no controlling entity. They rely on shared rules to coordinate people, capital, and resources, rather than centralized ownership.

Applying a corporate framework to networks distorts them into corporate forms. Control is re-concentrated, intermediaries re-emerge, and system-dependent participants are exploited.

Looking at the entire digital economy, this dynamic has led to a handful of highly centralized “company-like” networks—payment systems, e-commerce markets, social platforms, app stores—that capture disproportionate shares of the value created by participants.

Ride-hailing users pay $100 for a trip, but drivers only get a small part. Musicians’ songs are listened to by millions, yet they only earn a few cents per dollar.

Where company-like networks dominate, most of the value flows to intermediaries. Traditional corporate law protects these intermediaries and their investors, but users, creators, and workers are left unprotected.

For most of the internet era, this trade-off was unavoidable. Open protocols lacked sustainable economic models and couldn’t compete with the capital and coordination power behind corporate networks.

Blockchain changes this.

Blockchain and the software protocols deployed on it have given rise to a new system: blockchain networks. These networks are designed to be control-distributed, operate transparently, and exist as user-owned and operated shared infrastructure.

The value of blockchain networks increases with public use and can be distributed to participants—including those at the network’s edges—rather than being captured solely by central nodes.

Blockchain makes it possible to “build networks that truly operate like networks, not like companies.”

Blockchain technology is at a critical juncture. Past platform shifts—personal computers, mobile phones, the internet—are among the most significant technological innovations in human history. The advent of artificial intelligence is rapidly becoming one of them.

But all these platform shifts have ultimately led to highly concentrated power and control, with a few deciding the fate of countless consumers, creators, and developers dependent on these technologies and services.

As more economic activity digitizes and AI shapes more aspects, the question of “who controls the digital systems we rely on” becomes more critical than ever.

If control remains concentrated, the ability to shape outcomes, restrict access, and capture value will also concentrate: companies will dominate how networks operate and decide who benefits.

Decentralized blockchain networks offer an alternative: infrastructure that no single participant can easily rewrite, censor, or redirect.

In other words, these networks can help existing platforms decentralize, replacing them with networks that have the attributes of digital public goods—reducing lock-in effects, dispersing control, embedding neutrality, minimizing single points of failure, and returning ownership to users.

The goal of the CLARITY bill is to make this path truly feasible.

After the bill enters full Senate deliberation and receives updates, we will share more about what it specifically means for crypto builders.

But if CLARITY passes through the remaining legislative steps, the U.S. legal framework will finally align with the essence of blockchain networks. Builders will be able to operate transparently, raise funds domestically, and build for the long term without being forced into structural compromises due to regulatory ambiguity.

As more projects operate within U.S. regulation rather than outside it, regulators and law enforcement will have better tools to combat longstanding fraud and abuse in the industry.

What happens when crypto gets feasible regulation? We’ve seen it once before: the GENIUS Act unleashed a wave of innovation overnight. Today, we already see crypto in many mainstream applications—from stablecoins to AI agents—and more exciting developments are on the way.