A newly released draft of the US Clarity Act sets out Congress’s most detailed attempt yet to define how digital assets, payments and intermediaries should be regulated
After months of fraught, bipartisan negotiations between Senate Republicans, Democrats and industry, lawmakers unveiled the latest draft of the Digital Asset Market Clarity Act on January 12– a 278-page attempt to finally pin down how digital assets, payments and intermediaries should be regulated in the US.
First floated in mid-2025, the bill has evolved well beyond a narrow fight over crypto token classification. The latest text touches everything from who can operate digital payment rails, to how anti-money laundering rules apply, to whether the Federal Reserve should ever deal directly with consumers.
“After months of hard work, we have bipartisan text ready for Thursday’s markup. I urge my Democrat colleagues: don’t retreat from our progress. The Digital Asset Market Clarity Act will provide the clarity needed to keep innovation in the US & protect consumers,” said republican senator Cynthia Lummis.
Here are Payment Expert’s five key takeaways from the latest version.
1. Congress draws a firm line against retail central bank digital money
One of the most noteworthy elements in the Clarity Act’s latest draft is its treatment of central bank digital currency (CBDC) and the role of the Federal Reserve. Rather than defining how a US CBDC might work, the bill’s language statutorily limits what the central bank may do with digital money.
Under the bill’s general provisions, lawmakers would “amend the Federal Reserve Act to prohibit the Federal reserve banks from offering certain products or services directly to an individual, [and] to prohibit the use of central bank digital currency for monetary policy.”
That text makes two specific points:
- It would forbid Federal Reserve Banks from providing products or services directly to individuals.
- It would bar the use of a CBDC as a tool for monetary policy.
Another piece of related legislation moving alongside the Clarity Act – the Anti-CBDC Surveillance State Act – would likewise block a retail CBDC. Congressional debate around it highlights the desire among some lawmakers to enshrine this prohibition in statute rather than leave it to regulatory discretion.
For instance, Marjorie Taylor Greene has said publicly that “the only way to guarantee a ban on a central bank digital currency is through law.”
International comparisons help underscore how unusual this position is in the global context. Large central banks that are far along in CBDC work have taken a different tack:
- The European Central Bank’s digital euro project is explicitly aimed at creating a retail digital currency available to households and businesses, with private intermediaries handling distribution.
- The Bank of England has published extensive consultation papers exploring how a “digital pound” might function as central bank money for the general public.
- China’s central bank has already piloted its digital yuan among consumers in multiple cities.
Across these jurisdictions, the policy question typically is “how” to issue CBDC, not “whether” to do so at all. In contrast, the statutory language in the Clarity Act effectively makes retail CBDC off-limits in the US, at least as far as the Federal Reserve is concerned.
The bill does not explicitly comment on wholesale CBDC (a version used only between financial institutions) or on how private or tokenised money might interact with central bank infrastructure. But by codifying restrictions on consumer-facing retail digital money, it sets a distinct legal boundary that has no clear parallel in other major economies.
2. A wider net for “digital asset intermediaries”
Another area where the latest draft seeks to impose clarity is in defining who sits inside the regulatory perimeter as a “digital asset intermediary”.
The bill defines a digital asset intermediary as “a person that is engaged in digital asset activities and required by law to register with the Commodity Futures Trading Commission (CFTC) or with the Securities and Exchange Commission (SEC).”
Rather than listing specific business models, the text ties intermediary status to registration obligations under existing securities and commodities law, placing the focus on regulatory status rather than technology or product type. This approach differs from earlier iterations of the Clarity Act, which lawmakers and regulators had criticised for relying too heavily on functional descriptions that could quickly become outdated. By anchoring the definition to the authority of the SEC and CFTC, the bill leaves significant discretion to regulators to determine which activities trigger registration requirements over time.
In an international context, this stands in contrast to the European Union’s Markets in Crypto-Assets (MiCA) regime, which explicitly defines categories such as “crypto-asset service providers” and sets out a fixed list of regulated services, including custody, exchange and transfer. The US approach, by comparison, avoids creating a new payments-specific taxonomy for digital assets, instead folding them into existing financial regulatory structures.
3. Crypto payments are fully pulled into the compliance regime
The latest draft also seeks to resolve a long-running question in US policy debates: how anti-money laundering and sanctions rules apply to digital asset activity.
Title II of the bill sets out the “treatment under the Bank Secrecy Act and sanctions laws” for digital assets and directs regulators to apply existing financial crime frameworks to digital asset intermediaries. The text also mandates the development of digital asset examination standards and includes provisions aimed at areas policymakers have repeatedly highlighted as higher risk, such as crypto kiosks and cross-border transactions.
Rather than creating a bespoke AML regime for digital assets, the bill anchors oversight in existing US law. The Bank Secrecy Act, which underpins customer due diligence, transaction monitoring and suspicious activity reporting across the financial system, is treated as the baseline. In doing so, the legislation reflects concerns raised by US authorities over recent years about the use of digital assets for sanctions evasion and illicit finance.
This approach mirrors, but is not identical to, developments overseas. Under the European Union’s MiCA framework, crypto-asset service providers are brought within the scope of AML and counter-terrorist financing rules through parallel legislation, including updates to the EU’s Transfer of Funds Regulation. In the UK, crypto firms registered with the Financial Conduct Authority are already subject to AML supervision, though the UK has so far relied more heavily on regulatory guidance than statute to define the scope.
The Clarity Act’s approach differs in that it embeds these obligations directly into primary legislation tied to digital asset market structure. By doing so, it aims to remove ambiguity over whether token-based value transfer sits inside or outside the US financial crime regime.
4. Clearer – but stricter – rules on custody and bankruptcy
The latest draft also addresses how customer digital assets should be treated if an intermediary fails. Title VII of the bill introduces “customer property protections for ancillary assets and digital commodities in bankruptcy”. The section d seeks to clarify that customer digital assets held by an intermediary are not automatically part of the firm’s bankruptcy estate.
The language reflects concerns raised during previous insolvency proceedings, where courts were asked to determine whether customer-held crypto assets constituted customer property or assets of the failed firm. By addressing this question directly in statute, the bill attempts to reduce uncertainty around how such assets should be handled when an intermediary enters bankruptcy.
In contrast, other jurisdictions have taken different routes. In the European Union, custody and safeguarding requirements for crypto-asset service providers include explicit obligations to segregate client assets. Those rules are paired with insolvency protections at the national level, but the EU framework focuses more on ex ante custody standards than on bankruptcy outcomes.
The UK, meanwhile, has relied on a combination of trust law principles and regulatory guidance, with the FCA consulting on strengthened custody and safeguarding rules for crypto firms rather than embedding asset treatment directly in primary legislation.
The US approach in the Clarity Act sits somewhere between these models. Rather than prescribing detailed custody mechanics, the bill focuses on the legal status of customer assets at the point of insolvency, seeking to clarify how they should be treated once proceedings begin.
5. A clearer divide between software and services — but with grey edges
The final area the draft seeks to clarify is the long-running question of how far financial regulation should extend into software development.
Title VI of the bill includes a series of provisions aimed at protecting software developers and limiting when financial laws apply to code. The text states that certain activities – including developing, publishing or maintaining distributed ledger protocols or software – should not, on their own, trigger treatment as a regulated intermediary.
This principle is reflected in the inclusion of the Blockchain Regulatory Certainty Act, which is folded into the broader market structure framework. The intent, according to the bill text, is to ensure that persons who are not custodying assets, facilitating transactions, or exercising control over user funds are not regulated simply because they write or publish code.
The protections, however, do not extend to entities that operate services on top of that software, particularly where those services involve custody, transaction execution or customer interaction. The distinction hinges on activity, not intent, and leaves room for regulators to determine when a firm has crossed from software provision into financial intermediation.
This approach differs from that taken in other jurisdictions. Under the EU’s MiCA framework, for example, the focus is less on code and more on whether an entity is providing a crypto-asset service to clients, regardless of how decentralised the underlying technology may be. Developers may still fall outside scope, but the EU regime does not contain the same explicit statutory protections for software activity.
In the UK, regulators have similarly avoided drawing a bright legislative line between code and services, relying instead on case-by-case interpretation of existing financial law. That has left questions about developer liability largely to enforcement and guidance rather than statute.
Senate committees are due to consider the bill this week, with a markup scheduled for January 15. However, that timetable has already drawn objections from a group of Democratic senators, who have formally requested that the legislation be subject to a full public hearing before any vote.
In a letter dated January 12, Senators Jack Reed, Chris Van Hollen and Tina Smith wrote to Senate Banking Committee leaders warning that members and the public had not been given sufficient time to review the text. The lawmakers noted that the bill spans “hundreds of pages” and touches core financial statutes, including securities, banking, bankruptcy and sanctions law, arguing that proceeding directly to a markup would be inappropriate for legislation of this scope.
The letter stops short of opposing the bill outright, but it highlights continuing unease among some Democrats about both the process and the breadth of the proposal, despite months of bipartisan negotiation.
