The CLARITY Act: A Crypto Beginner’s Guide

If you own crypto in the United States, you have probably seen the CLARITY Act in the news this year. The short version: it is a bill that would give the U.S. crypto market a clearer set of rules. As of May 2026, it has cleared two big checkpoints in Congress and is closer to becoming law than any digital-asset bill before it. 

Here is what it does, in plain language. 

What is “The CLARITY Act”? 

The Digital Asset Market Clarity Act of 2025 (or simply “The CLARITY Act”) is a proposed federal law. It sets rules for how digital assets are classified, who regulates them, and what crypto exchanges have to do to operate in the U.S. 

The bill was introduced in May 2025 by Representatives French Hill and G.T. Thompson. It passed the House of Representatives on July 17, 2025. 

Why does it matter?

Two federal agencies have spent years sharing oversight of crypto: 

• SEC: The Securities and Exchange Commission
• CFTC: The Commodity Futures Trading Commission

Both have claimed parts of the crypto market, often through court cases rather than written rules. That left builders and exchanges unsure which agency they answered to. The CLARITY Act draws a clearer line between the two.

How oversight gets split? 

Think of it like sorting items into two baskets: 

• SEC basket: tokens that work like investments in a company. Many Initial Coin Offerings (ICOs) fall here.
• CFTC basket: "digital commodities". Bitcoin is the clearest example. Ethereum is widely expected to qualify.

The bill also introduces a "mature blockchain test", so a token can move from the SEC basket to the CFTC basket once its network is decentralized enough.

A simple way to picture it: imagine a startup where the founders own most of the shares at first. Years later, after the company goes public, ownership is spread across many investors. The mature blockchain test captures that same kind of shift for crypto networks. 

What else does the bill cover?

• Exchange registration: Centralized exchanges, brokers, and dealers would register with the CFTC. They would need to protect customer funds and file regular reports.
• AML and KYC: Registered platforms would follow customer due-diligence and audit rules similar to traditional financial firms.
• Tax reporting: More platforms would file Form 1099-DA with the IRS, similar to how stock brokers file 1099-B forms today.
• Stablecoins: The bill extends the GENIUS Act and limits rewards on passive stablecoin holdings, while still allowing rewards tied to actual trading or transactions.
• DeFiprotections: Section 604 of the bill is designed to protect non-custodial developers from being treated as money transmitters.
• No central bank digital currency to individuals: The bill blocks the Federal Reserve from issuing a CBDC to people.

Where do things stand (the timeline)?

CLARITY Act snapshot, May 2026 

• July 17, 2025 - House vote: Passed 294 to 134.
• January 29, 2026 - Companion bill passed by the Senate Agriculture Committee which overlooks the CFTC.
• May 14, 2026 - Senate Banking Committee (overlooks the SEC) approved it, by a 15 to 9 bipartisan vote. Democratic Senators Ruben Gallego (Arizona) and Angela Alsobrooks (Maryland) joined every Republican on the committee.
• Tax reporting: More platforms would file Form 1099-DA with the IRS, similar to how stock brokers file 1099-B forms today.
• Next steps:
  • Committee reconciliation: Merge the two Senate versions
  • Hold a full Senate vote (60 votes needed to overcome a filibuster)
  • House reconciliation
  • Presidential approval

What could this mean for you? 

If the bill becomes law: 

• Easier to spot legal exchanges. Registered platforms will be clearly listed under federal oversight.
• Stronger customer-fund protections. Registered platforms would meet specific custody and disclosure standards.
• More automatic tax reporting. Expanded 1099-DA rules mean more of your crypto activity is reported to the IRS without you tracking it yourself.
• More institutional participation over time. Clearer rules tend to bring in larger investors, which generally adds liquidity, though market outcomes are never guaranteed.

What is still being discussed?

A few open questions remain before the full Senate vote: 

• Stablecoin yield rules. The banking industry and the crypto industry hold different views on whether platforms should pay rewards on stablecoin balances.
• Ethics provisions. Senator Alsobrooks has said her support depends on adding ethics rules. A separate amendment from Senator Chris Van Hollen failed in committee by 11 to 13 and may be raised again.
• DeFi definitions. The exact meaning of "non-custodial" and "decentralized" in law is still being worked out.
• The calendar. Senate floor votes on big bills typically need to happen before the August recess.

Stay in the Loop 

Rules around crypto are still being written, and the details matter. RockWallet will keep breaking down each major update in plain language, so you always know what's changing and what it actually means for you.