a16z: How Should Crypto Entrepreneurs Understand the CLARITY Act?

Original title: What builders need to know about the CLARITY Act, what it is and why it matters

Original author: miles jennings, a16z crypto

Compiled by: Jiahuan, ChainCatcher

The Senate Banking Committee just advanced crypto "market structure" legislation (i.e., legislation concerning market division, regulatory responsibilities, and trading rules) on a bipartisan basis. This is a historic moment for the crypto industry.

Why? Because the CLARITY Act for Digital Asset Markets will finally establish clear rules for blockchain networks and digital assets.

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

The Securities Act of 1933 established investor protection mechanisms that underpinned a century of American capital formation and innovation. CLARITY's significance is similar — in the landscape of U.S. financial regulation, this is a once-in-a-generation shift that brings enormous opportunity.

Having just passed Senate committee consideration today, this foundational legislation critical to the entire crypto industry is closer than ever to becoming law.

Startup founders, consumers, and large traditional financial institutions and investors moving on-chain will all benefit.

Next, the bills from the two congressional committees will be merged into a single comprehensive bill for a full Senate vote. If passed, it goes to the House for approval, then to the White House for the President's signature.

Why the U.S. Needs CLARITY Now

Over the past decade, the crypto industry has expanded, but the U.S. has never had a complete regulatory framework. Regulators had to piece together existing rules to govern this industry, an approach that has been a total failure.

This has not only created confusing legal interpretations and contradictory stances but has also led to significant government overreach and abuse of power.

This regulatory uncertainty hasn't just hindered innovation; it has also provided fertile ground for bad actors. Among the highly publicized negative events in crypto over the past decade, malicious actors could easily launch products exploiting regulatory loopholes to exploit consumers.

Meanwhile, responsible builders faced questionable "regulation by enforcement."

This uncertainty has already pushed crypto development overseas. When the U.S. fails to leave room for innovation, entrepreneurs seek out other jurisdictions, including those that have already introduced more sophisticated regulatory regimes.

The EU's Markets in Crypto-Assets Regulation (MiCA) and the UK's crypto regulations are two examples of the U.S. falling behind.

Fortunately for U.S. innovation, no other jurisdiction has yet gotten the regulatory formula perfectly right. But tailored regulatory regimes will eventually attract and concentrate entrepreneurial activity—along with the economic value and jobs they create—in these regions.

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

Therefore, if the U.S. provides regulatory clarity for builders, domestic innovation will greatly benefit. The GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act) passed in the U.S. 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), spawning a new model: open monetary infrastructure.

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

When legal frameworks are designed to both foster innovation and protect consumers, the U.S. can lead the way, and the world benefits.

Entrepreneurs and early adopters who believe in the promise of crypto, regardless of outside perception, deserve a clear regulatory framework to realize their vision.

They also need a framework that acknowledges the potential of blockchain networks to drive an important and novel technology platform shift. This shift must transcend the speculative applications spawned by poor policy, allowing people to build beyond the initial financial use case (which is itself already covered by existing U.S. regulations).

CLARITY is specifically tailored to establish such a clear framework.

How We Got Here

The content of the CLARITY Act is not entirely new. Many of its concepts and principles are derived from existing commodity and securities laws. The Act also evolved from previous legislative iterations, including two "market structure" bills originating in the House:

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

Similar to the current Senate bill, FIT21 and the House version of CLARITY both sought 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 regarding crypto, determining whether a digital asset is a security or a commodity;

· Ensure oversight of crypto trading platforms;

· Further protect U.S. consumers through rules governing crypto transactions.

Two years ago, FIT21 passed with overwhelming bipartisan support (279 yea to 136 nay, including 71 Democrats).

The House version of CLARITY passed in July 2025 with even higher bipartisan support (294 yea to 134 nay, including 78 Democrats).

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

The Senate version of CLARITY builds on the bipartisan momentum from the House and improves upon previous bills in several key aspects (detailed below). This bill has been progressing in the Senate for several years, with the fastest pace occurring over the past year:

· June 2022, Senators Lummis and Gillibrand first introduced the Lummis-Gillibrand Responsible Financial Innovation Act, the first bipartisan legislative proposal aiming to establish a complete regulatory framework for the crypto industry.

· July 2025, the Senate Banking Committee (the committee overseeing the SEC) released a discussion draft of the legislation under its jurisdiction, merging and unifying the approaches of the Lummis-Gillibrand bill and the House version of CLARITY.

· Published a Request for Information to gather feedback and legislative solutions, seeking to balance innovation with maintaining financial stability and protecting consumers.

· September 2025, based on the feedback received, the Senate Banking Committee released a second discussion draft.

· January 2026, the Senate Banking Committee released another iteration, reflecting months of bipartisan negotiations.

· Also in January 2026, the Senate Agriculture Committee released and advanced market structure legislative drafts under its jurisdiction.

· Today (May 14, 2026), the Senate Banking Committee just advanced the parts of the CLARITY Act under its purview during a "markup" session.

Why CLARITY Matters: Networks Are Not Companies

For over a century, building companies has been the primary driver of U.S. innovation. This path is well-established: entrepreneurs raise capital, succeed, and generate profits for shareholders.

U.S. law has finely honed 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 presumes centralized control and requires its permanence. But networks don't have a controller. Networks coordinate people, capital, and resources through shared rules, not centralized ownership.

Applying a framework designed for companies to networks distorts the network into the shape of a company. Control becomes re-centralized, intermediaries reappear, and value is extracted from those who depend on the system.

Across the digital economy, this dynamic has spawned company-shaped networks with immense concentrated power—payment systems, e-commerce marketplaces, social platforms, app stores—that capture a disproportionate share of the value created by participants.

A ride-hailing user pays $100 for a trip, and the driver gets a small fraction. A musician creates songs streamed by millions, yet receives only a few cents for every dollar of revenue generated.

Wherever company-shaped networks dominate, most value flows to the intermediary. 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 to compete with the capital and coordination power behind company-shaped networks.

Blockchain changes this.

Blockchains, and the software protocols deployed upon them, enable a new type of system: the blockchain network. These networks are designed for decentralized control, operate under transparent rules, and exist as shared infrastructure owned and operated by users.

The value of a blockchain network increases with public usage and can be distributed to participants—including those at the network's edge—rather than being captured by a central node.

Blockchains make it possible to "build networks that truly operate like networks, not like companies."

Blockchain technology is at a critical juncture. Past platform shifts—personal computers, mobile phones, the internet—are among the most significant technological innovations in human history. The emergence of AI is rapidly becoming one as well.

But all these platform shifts ultimately led to highly concentrated power and control, where a few decide the fate of the countless consumers, creators, and developers who depend on these technologies and services.

As more economic activity becomes digitized and shaped by AI, the question of "who controls the digital systems we depend on" becomes more critical than ever.

If this control remains concentrated, the ability to shape outcomes, restrict access, and extract value is also concentrated: the company dictates how the network operates and decides who benefits.

Decentralized blockchain networks offer an alternative: an infrastructure that no single participant can easily rewrite, censor, or redirect.

In other words, these networks can help decentralize existing platforms, replacing them with networks possessing the attributes of digital public goods—reducing lock-in effects, distributing control, embedding neutrality, reducing single points of failure risk, and returning ownership to users.

The CLARITY Act is designed to make this path viable.

Once CLARITY advances to a full Senate vote and updates emerge, we will share more on what it specifically means for crypto builders.

But if CLARITY clears the next, and final, steps of the legislative process, the U.S. legal framework will finally align with the nature of blockchain networks. Builders will be able to operate transparently, raise capital domestically, and build for the long term, without making structural compromises driven by regulatory ambiguity.

And as more projects operate within, rather than outside, the U.S. regulatory perimeter, regulators and enforcement bodies will have better tools to combat the fraud and abuse that have long plagued this industry.

We have already seen what happens when crypto gets a viable regulatory path: the GENIUS Act unleashed a wave of innovation overnight. Today we already see crypto in several mainstream applications, from stablecoins to AI agents, and so on — the best is yet to come.

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