The CLARITY Act uses Bank Secrecy laws to quietly kill decentralized access without ever banning code

DeFi exclusions sound protective, yet the CLARITY Act’s Bank Secrecy expansion may target your access points

While supporters say the CLARITY Act could bring long-awaited regulatory certainty to crypto markets, not everyone is on board.

Critics argue the bill doesn’t need to “ban DeFi” to reshape it. Their claim is that CLARITY can leave base-layer software intact while shifting the real battleground to regulated access points: the brokers, dealers, custodians, exchanges, and interfaces most users rely on to reach on-chain markets.

In that reading, the “hidden compliance choke point” is not protocol code. The perimeter is expanding as access providers are drawn deeper into Bank Secrecy Act obligations and registration requirements, raising fixed costs and liability for anyone serving customers at scale.

That dynamic is why critics frame CLARITY less as a straightforward market-structure upgrade and more as a pathway to concentration: permissionless rails may still exist, but most users could be funneled toward a smaller set of compliant venues that determine which tokens, pools, and routes remain practically reachable.

Vandell Aljarrah of Black Swan Capital called the Digital Asset Market Clarity Act of 2025 “the nationalization of crypto” and “the final handover of decentralized finance.”

His comments circulated as Senate consideration of the House-passed bill has moved slowly, even as the measure advanced through the Agriculture Committee.

Financial freedom advocate, Aaron Day, also offered a “decoder ring” framing that maps “consumer protection” to “surveillance” and “market structure” to “rigged” outcomes.

The Senate Banking Committee’s executive session to consider the bill remained listed as “POSTPONED” for Jan. 15, 2026, but the bill has since logged its first concrete Senate win after the Senate Agriculture Committee advanced the CLARITY Act on Jan. 29.

For broader context on how the Banking committee delay and the Agriculture committee advance fit into the current U.S. policy calendar, see CryptoSlate’s coverage of developer-protection debates and committee timelines and the latest update on the CLARITY Act’s Senate movement.

The bill passed the House on July 17, 2025, by a 294–134 vote.

The Senate received the bill on Sept. 18, 2025, read it twice, and referred it to the Senate Committee on Banking, Housing, and Urban Affairs, where it remains pending.

What the CLARITY Act would change

CLARITY’s core design choice, as summarized by the Congressional Research Service, is a market structure framework that would give the Commodity Futures Trading Commission a “central role.”

The CRS summary says it would preserve certain Securities and Exchange Commission authority, including through a “new limited exemption.”

The CRS summary also defines a “mature blockchain” as one “not controlled by any person or group of persons under common control.”

That threshold matters for how tokens and networks would be treated as they develop past initial distribution and governance stages.

Those mechanics help explain why critics focus less on whether on-chain software can exist and more on where lawful distribution and liquidity may concentrate if CLARITY becomes the default compliance path.

The bill text contains two provisions that complicate simple claims that it “bans DeFi,” because it explicitly excludes enumerated decentralized finance activities on both the SEC side and the CFTC side of the framework.

Section 309, titled “Exclusion for decentralized finance activities,” lists activities that are “not subject to this Act,” including categories such as participating in network validation, operating nodes and oracles, and publishing and maintaining protocols, among other technical functions enumerated in the text.

Section 409 contains a parallel “Exclusion for decentralized finance activities” on the CFTC side.

At the same time, the exclusions are not framed as immunity from enforcement.

Both the SEC-side and CFTC-side exclusions include carve-backs that preserve anti-fraud and anti-manipulation authority, and the CFTC-side language also preserves authority tied to false reporting as specified in the text.

That structure creates a forward-looking implementation question for protocol teams, interface builders, and liquidity venues.

It centers on how regulators interpret “control,” affiliation, and customer access points when anti-fraud authority is preserved even where the act’s registration perimeter does not apply to certain listed DeFi activities.

BSA expansion and the compliance perimeter

Day’s “surveillance” framing maps more directly onto another part of the text: CLARITY’s amendments to the Bank Secrecy Act.

In the House-passed version, the bill expands the BSA definition of “financial institution” to include digital commodity intermediaries, including “digital commodity broker” and “digital commodity dealer.”

It also extends coverage to “any digital commodity exchange” that permits “direct customer access,” according to the bill text.

In the official House-passed Congressional Record text, the developer protection language appears as Section 109, titled “Treatment of certain non-controlling blockchain developers.”

The BSA language appears as Section 110, titled “Application of the Bank Secrecy Act,” a numbering detail that matters when market participants cite “developer safe harbor” and “BSA expansion” in the same debate.

The Section 109 language states that certain non-controlling blockchain developers “shall not be treated as a money transmitter” solely on the basis of specified activities, according to the official record.

That safe-harbor approach, paired with BSA expansion for intermediaries that provide direct customer access, creates a scenario in which core protocol work and self-custody tooling may sit in one lane.

Compliant distribution could consolidate in another lane where registration, reporting, and BSA programs become table stakes for fiat-connected access.

For critics, that is where “market structure” turns into a centralization risk: if the law and subsequent rulemaking make customer-facing access costly and legally exposed, the market can converge on a small set of venues that can afford compliance and absorb enforcement risk.

How permissionless finance gets permissioned in practice

Critics argue the centralization risk is less about whether smart contracts can technically run and more about which choke points end up controlling reachability for everyday users.

One choke point is the user interface layer. Even if publishing a protocol is excluded, most users rely on frontends, hosted web apps, and aggregators to discover pools and execute trades.

Even with the bill’s enumerated DeFi exclusions (which include some UI/data-access functions), critics argue the customer-facing execution layer, meaning the venues and products that effectively provide “direct customer access” to trading, could still become the compliance bottleneck in practice

Another choke point is infrastructure. Many wallets and apps depend on centralized RPC providers, hosted indexers, relayers, and transaction-routing services. If compliance expectations migrate toward the services that “make DeFi usable,” the practical permission set can shift from “anyone can interact with a contract” to “anyone can interact if their access provider allows it.”

A third choke point is regulated liquidity. Stablecoin issuers, centralized exchanges, and large custodians sit at the junction of issuance, redemption, and market-making. If CLARITY’s BSA perimeter makes these entities the default distribution lane for regulated dollars onchain, they can indirectly shape which routes remain liquid and economical, even if the underlying contracts remain available.

Stablecoins show why access points matter

Stablecoins provide a measurable context for why the distribution lane matters, because they already sit at a scale where compliance choke points can influence onchain liquidity without changing base-layer code.

DefiLlama’s stablecoins dashboard put total stablecoin market capitalization at $307.081 billion, with Ethereum’s chain share at 52.52% at the time of the snapshot included in this reporting pack.

Related: CryptoSlate’s stablecoin regulation coverage and stablecoin market structure reporting.

A forward-looking reading of the “incumbent protection” critique is that the bill’s practical impact may be determined less by whether protocol publishing is excluded.

Instead, it may depend on whether BSA-covered access points become the default venue for stablecoin issuance, redemption, and routing, because those functions touch “direct customer access” channels enumerated in the amendments.

If that perimeter expands as written, compliance costs may function as fixed costs that favor larger brokers, dealers, custodians, and exchanges over smaller venues.

That is one pathway by which “market structure” can translate into concentration even when decentralized protocols remain available, because liquidity and distribution tend to follow the lowest-friction compliant rail.

The macro-policy backdrop also aligns with a regulated-rails trajectory that critics associate with “handover” narratives, even when the legal mechanism is not nationalization.

The Bank for International Settlements has argued that a next-generation financial system is forming around a tokenized “unified ledger” that integrates tokenized central bank reserves, commercial bank money, and government bonds.

The BIS also said stablecoins “fall short,” adding that without regulation they pose risks to financial stability and monetary sovereignty, and it expanded on the concept in its Annual Economic Report chapter.

Those BIS positions do not address H.R. 3633 directly, yet they frame a global policy direction in which tokenization is paired with regulated money and compliance tooling.

That direction would interact with any U.S. market structure bill that expands BSA coverage for digital commodity intermediaries.

What comes next after Agriculture’s advance

After the Senate Agriculture Committee advanced the CLARITY Act on Jan. 29, the legislative path now points to a two-track Senate fight: Agriculture has moved its market-structure package forward, while the Banking Committee process remains stalled amid an escalating dispute over stablecoin “interest” and rewards.

One path is the bill gaining Senate floor time after clearing the committee reporting process, setting up a full-chamber battle over the CFTC-centered architecture described by CRS and how “digital commodity” intermediaries should register and be supervised.

It would still set a clearer registration and compliance baseline for intermediaries while keeping enumerated DeFi exclusions with anti-fraud carve-backs, but the practical impact would turn on how definitions around access, control, and covered intermediaries are finalized across the Senate process.

Another path is a longer, politically driven rewrite as Senate leaders and committees try to assemble the votes needed to proceed, including potential changes tied to stablecoin rewards language that has already contributed to Banking committee gridlock.

The bill already preserves anti-fraud and anti-manipulation authority and expands BSA coverage categories in the text, which could shape how those hooks are applied as lawmakers attempt to unify the Senate’s approach across committees.

A third path is continued procedural delay, in which Agriculture’s advance does not translate into floor consideration because Banking’s unresolved stablecoin-rewards fight blocks a broader deal and Senate leaders do not prioritize floor time.

The House’s 294–134 vote shows prior momentum, while the split committee dynamics in the Senate show timing and coalition risk, particularly if the bill ultimately requires a bipartisan vote threshold to move through the chamber.

For traders and builders tracking whether the “nationalization” critique turns into measurable concentration, the bill’s text points to observable signposts rather than slogans.

Those include how many intermediaries register in the new categories, whether liquidity and listings concentrate among venues that can run BSA programs, and whether stablecoin circulation becomes more dependent on compliant issuance and redemption channels.

Vandell’s post frames that set of outcomes as a political choice, while Day’s post frames it as a surveillance story.

The bill text frames it as a compliance perimeter and market-structure architecture, but the Senate’s next steps will likely be shaped by how lawmakers resolve the stablecoin rewards dispute and align Agriculture and Banking into a single, passable package.