a16z Crypto: How should crypto entrepreneurs understand the CLARITY Act?

Author: @milesjennings

Compiled by: Jiahua, ChainCatcher

The Senate Banking Committee has just voted in a bipartisan manner to advance the crypto "market structure" legislation (i.e., legislation regarding market division, regulatory responsibilities, and trading rules), marking a historic moment for the crypto industry.

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

For the past decade, the lack of clear regulation in the U.S. has distorted the market, stifled innovation, and exposed consumers to significant risks. CLARITY will put an end to this situation.

The Securities Act of 1933 established a mechanism for investor protection, supporting a century of capital formation and innovation in the U.S. The significance of CLARITY is similar—this is a once-in-a-lifetime shift in the U.S. financial regulatory landscape that will bring enormous opportunities.

With the Senate's approval today, this foundational legislation, crucial for the entire crypto industry, is closer to becoming law than ever before.

Whether it is startup founders, consumers, or large traditional financial institutions and investors migrating to the blockchain, all will benefit.

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

Why the U.S. Needs CLARITY Now

Over the past decade, the crypto industry has been expanding, but the U.S. has never had a complete regulatory framework. Regulators have had to piece together existing laws to manage this industry, and this approach has been a complete failure.

This has not only led to confusion in legal interpretations and inconsistent standards but has also triggered serious government overreach and abuse of power.

This regulatory uncertainty has not only hindered innovation but has also provided fertile ground for bad actors. In the highly publicized negative news stories from the crypto space over the past decade, ill-intentioned individuals have been able to easily launch products that exploit regulatory loopholes, taking advantage of consumers.

Meanwhile, responsible builders have had to face the dubious practice of "enforcement as legislation."

This uncertainty has pushed crypto development overseas. When the U.S. fails to provide space for innovation, entrepreneurs will seek other jurisdictions, including those that have already implemented 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. lagging behind.

Fortunately for U.S. innovation, no other jurisdiction has yet gotten the regulatory approach right. But tailored regulatory systems will ultimately attract and concentrate entrepreneurial activities in those regions, along with the economic value and job opportunities they create.

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

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

GENIUS established a regulatory framework for stablecoins (digital assets pegged to fiat currency, typically the U.S. dollar), giving rise to a new model: open monetary infrastructure.

After this bill was passed, it brought unprecedented growth and adoption, benefiting the U.S. economy and supporting the long-term dominance of the dollar.

When the legal framework is designed to promote innovation while protecting consumers, the U.S. can lead the way, and the world will benefit as a result.

Those entrepreneurs and early users who believe in the promise of crypto should have a clear regulatory framework to realize their visions, regardless of external perceptions.

They also need a framework that recognizes the potential of blockchain networks to drive a significant and novel transformation of technological platforms. This transformation should go beyond speculative applications born from poor policies, allowing people to build beyond the initial financial scenarios (which are already covered by existing U.S. regulations).

CLARITY is tailored to establish such a clear framework.

How We Got Here

The contents of the CLARITY Act are not entirely new. Many of its concepts and principles stem from existing commodity and securities laws. This bill has also evolved from previous rounds of legislative iterations, including two "market structure" bills originating from the House:

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

Similar to the current Senate bill, both FIT21 and the House version of CLARITY 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;
• Further protect U.S. consumers through regulatory constraints on crypto trading.

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

The House version of CLARITY passed in July 2025 with an even higher bipartisan support rate (294 votes in favor to 134 against, with 78 Democrats supporting it).

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

The Senate version of CLARITY has further advanced on the momentum of bipartisan cooperation in the House and has made improvements on several key points compared to previous bills (details below). This bill has been progressing in the Senate for several years, with the past year being the fastest-paced phase:

• June 2022, Senators Lummis and Gillibrand first introduced the "Lummis-Gillibrand Responsible Financial Innovation Act," the first bipartisan legislative proposal aimed at establishing a complete regulatory framework for the crypto industry.
• July 2025, the Senate Banking Committee (which oversees the SEC) released a discussion draft of the bill within its jurisdiction, merging and unifying the ideas from the Lummis-Gillibrand Act and the House version of CLARITY.
• Issued a request for information to gather feedback and legislative solutions, hoping to find a balance between innovation and maintaining financial stability and consumer protection.
• September 2025, based on the feedback received, the Senate Banking Committee released a second discussion draft.
• January 2026, the Senate Banking Committee released another iterative version reflecting the results of months of bipartisan negotiations.
• Also in January 2026, the Senate Agriculture Committee released and advanced its market structure legislative draft within its jurisdiction.
• Today (May 14, 2026), the Senate Banking Committee has just advanced the portion of the CLARITY Act for which it is responsible in a "markup" meeting.

Why CLARITY Matters: Networks, Not Companies

For over a century, establishing companies has been the main driver of innovation in the U.S. This path has become very mature: entrepreneurs raise funds to start businesses, and after success, profits are returned to shareholders.

U.S. law has finely tuned this model, specifying responsibilities and emphasizing transparency to align incentives and manage trust in founders and operators.

This framework is suitable for building companies. But it is not suitable for building networks.

The existing legal framework presupposes control by a single manager and requires that such control be maintained over the long term. But networks do not have a controlling party. Networks rely on shared rules to coordinate people, capital, and resources, rather than centralized ownership.

Imposing a framework designed for companies onto networks distorts them into corporate forms. Control becomes concentrated again, intermediaries reappear, and those who depend on the system are extracted of value.

Looking at the entire digital economy, this dynamic has given rise to a number of company-like networks with significant concentrated power—payment systems, e-commerce markets, social platforms, app stores—they capture a disproportionate share of the value created by participants.

Ride-sharing users pay $100 for a ride, and drivers receive only a small portion. Musicians' songs are streamed by millions, yet they receive only a few cents from every dollar earned.

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

For much of the internet era, this trade-off was unavoidable. Open protocols lacked sustainable economic models and could not compete with the capital and coordination capabilities behind company-like networks.

Blockchain has changed this.

Blockchain and the software protocols deployed on it have given rise to a new type of system: blockchain networks. The design goal of these networks is to decentralize control, operate according to transparent rules, and exist as shared infrastructure owned and operated by users.

The value of blockchain networks increases with public use and can be distributed to participants—including those on the network's periphery—rather than being taken solely by central nodes.

Blockchain makes it possible to "build networks that operate truly like networks rather than like companies."

Blockchain technology is at a critical moment. The past few platform transformations—personal computers, mobile phones, the internet—have been some of the most significant technological innovations in human history. The emergence of artificial intelligence is also rapidly becoming one of them.

However, all these platform transformations have ultimately led to a high concentration of power and control, with a few individuals determining the fate of countless consumers, creators, and developers who rely on these technologies and services.

As more economic activities become digital and more processes are shaped by artificial intelligence, the question of "who controls the digital systems we rely on" has become unprecedentedly critical.

If this control continues to concentrate, then the ability to shape outcomes, restrict access, and extract value will also concentrate: companies will dominate how networks operate and decide who benefits.

Decentralized blockchain networks offer another path: an 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 possess the attributes of digital public goods—reducing lock-in effects, decentralizing control, embedding neutrality, minimizing single points of failure, and returning ownership to users.

The design goal of the CLARITY Act is to make this path truly viable.

Once CLARITY enters full Senate deliberation and updates occur, we will share more about what it specifically means for crypto builders.

But if CLARITY successfully navigates the next and final steps of the legislative process, 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 to make structural compromises due to regulatory ambiguity.

As more projects operate within the U.S. regulatory framework rather than outside of it, regulators and enforcement agencies will have better tools to combat the fraud and abuse that have long plagued this industry.

What happens when crypto receives viable regulation has already been witnessed once: the GENIUS Act unleashed a wave of innovation overnight. Today, we can already see crypto's presence in several mainstream applications, from stablecoins to AI agents, and more exciting developments are yet to come.