According to Dr. Friederike Ernst, co-founder of blockchain protocol Gnosis, regulatory provisions under the US Digital Asset Market Structure Clarity Act, also known as the CLARITY Act, threaten to give huge financial institutions control over cryptocurrencies.
Regulations in the CLARITY Cryptocurrency Market Structure Act assume that business must go through centralized intermediaries, which creates the risk of crypto rails consolidating in the hands of a few entrenched players, Ernst told Cointelegraph.
“The real breakthrough in Blockchain wasn’t just the new financial infrastructure. It was the ability for users themselves to become owners of the networks they rely on,” she said. Ernst added:
“If activity is pushed back by institutional intermediaries, users risk falling back into customers renting access to financial technology rather than shareholders. The challenge is to ensure regulatory transparency that does not unintentionally undermine this ownership model.”
Despite the bill’s shortcomings, the CLARITY Act clarifies regulatory jurisdiction over cryptocurrencies between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), and protects peer-to-peer trading and self-custody, Ernst said.
However, the failure of the Market Structure Act to adequately protect open, permissionless blockchain rails and decentralized financial protocols risks bringing the same points of failure of the legacy financial system to cryptocurrencies, Ernst said.
Related: According to the former head of the CFTC, transparency of cryptocurrency regulations is more critical for banks
The CLARITY Act is stalled because of banks and established financial institutions
The long-awaited CLARITY Act has stalled in Congress due to a disagreement between the cryptocurrency industry and the banking industry over the viability of stablecoins and whether stablecoin issuers can share interests with holders.
In January, cryptocurrency exchange Coinbase announced it was withdrawing its support for the bill, citing concerns that the legislation would weaken the decentralized finance industry, prohibit the viability of stablecoins and prevent the development of a tokenized real-world asset sector.
“We’d rather have no bill than have a bad bill,” says Coinbase CEO Brian Armstrong he said in response to reading the draft act.
US Senator Bernie Moreno expressed optimism that the CLARITY Act will be adopted by April and will reach US President Donald Trump’s desk for signature.
However, if the bill is not passed by April 2026, the chances of it coming into force in 2026 will be “extremely low,” says Alex Thorn, head of company-wide research at investment firm Galaxy.
“It is very possible that rewards are not the ‘final’ hurdle, but merely the current high point at which reckoning dies” – Thorn he said in a Saturday post on X, pointing out potential issues with DeFi, developer protections, and regulators.
Warehouse: The Clarity Act risks repeating Europe’s mistakes, a cryptocurrency lawyer warns
