a16z founder in-depth interview: Why we need the CLARITY Act

Original source: a16z

Original translation: Chopper, Foresight News

In a recent episode of the a16z crypto podcast, a16z founder Marc Andreessen and a16z crypto founder Chris Dixon sat down with host Robert Hackett to discuss the CLARITY Act. This market structure bill is currently advancing through the Senate, and whether it passes or stalls will have far-reaching implications. The following is an edited and condensed transcript of the conversation. You can watch the full episode to hear the entire discussion.

Robert: Congress is considering a once-in-a-century piece of market structure legislation that could determine where the future financial system and internet technology will take root. The bill passed the House last year with bipartisan support and has since been moving through the Senate.

There have been many debates and obstacles surrounding this technology, which we'll get into shortly. But before that, let's take a step back and talk about why regulatory clarity matters so much, what the cost of the status quo is, and what this bill means for America and for everyone who might use this technology in the future.

Marc, let's start with your perspective. In January 2014, you published an op-ed in the New York Times titled "Why Bitcoin Matters." The environment then was completely different from today, and it was a highly controversial view at the time. The so-called crypto industry back then looked nothing like it does today. What has changed in the industry from then to now?

Marc: Sure. 2014 feels incredibly distant now. The fact that the New York Times even ran a positive piece on crypto back then feels like centuries ago. I'm still proud of that article, and many of its points still hold up today. It was written five years into this macro technological wave, and at the time, simply believing this technology had long-term value was itself a contrarian act.

A large number of people needed to learn about, embrace, and participate in this space—that remains true today. Looking back, the only thing I'd adjust in that article is that everywhere I wrote "Bitcoin," I'd now write "crypto." At the time, the vision was that Bitcoin would continue to develop while also enabling real-world asset tokenization and virtual asset applications like NFTs. Of course, that path didn't unfold as imagined. Multiple new blockchains and crypto platforms emerged, and eventually Ethereum and a host of L1 blockchains came into being. What started as a single technology grew into an entire industry. Bitcoin itself has been enormously successful, but what's even more notable is the explosion of innovation across the entire sector.

Robert: I have to admit, many of the points in that article still hold up. One prediction that stood out to me was: "Over the next few years, there will be a lot of dramatic stories around this new technology." I'd say you nailed that prediction.

Chris, you've also witnessed the industry evolve from its early days. What's changed compared to the startup phase?

Chris: In the early days, participants were mostly enthusiasts and true believers—a niche subculture. The only mainstream technology was Bitcoin, and as Marc mentioned, early emerging blockchains faced a host of issues around performance and scalability. Fast forward to today, and we see major banks and fintech companies announcing platforms built on stablecoins, tokenized stocks, and various digital assets almost every day.

To briefly explain stablecoins: they're essentially the same concept as the Bitcoin vision Marc described—digital dollars on-chain. Today, stablecoin transaction volumes rival the Visa network, with quarterly volumes reaching trillions of dollars. With stablecoins, you can open WhatsApp and send money to virtually anywhere in the world at near-zero cost, as easily as sending a text message. That's what money movement should look like. As an internet pioneer, Marc probably understands this well: early internet builders expected this kind of scenario to arrive much sooner. For various reasons, that vision was delayed, but now the dream of money flowing as freely as information bits has finally become reality. The industry has matured, and the underlying infrastructure has improved dramatically. Just three years ago, completing one of these transactions could cost several dollars or even tens of dollars in fees. Today, on major L1 blockchains like Solana and Ethereum, transaction confirmation takes less than a second, and transfer costs are under a cent.

Why the Crypto Industry Urgently Needs Regulatory Rules

Robert: You mentioned that stablecoin volumes now rival the Visa network, with trillions of dollars flowing through the system. BlackRock, JPMorgan, Visa, Fidelity, Mastercard—a host of major financial institutions have entered the space. The list goes on, with major institutions building businesses on top of this technology. But the industry has developed for years without a clear regulatory framework and policy guidance. Why do we urgently need to establish regulatory rules now?

Chris: There are multiple reasons why crypto regulation has been split into two major buckets: stablecoins and everything else in the digital asset market. Last year, the GENIUS Act passed through Congress and was signed into law, creating a complete regulatory framework for stablecoins. Coincidentally, stablecoins have also been the fastest-growing sector over the past year. Clear regulatory boundaries give builders the certainty they need.

For ordinary American consumers, if you use USDC or other stablecoins compliant with the GENIUS Act, you can be confident that behind every stablecoin, there's a dollar of reserves held in a bank. That provides consumers with confidence and asset protection. If you're an institution—banks, Stripe, PayPal—looking to enter the market, you need predictable rules and a solid regulatory framework to ensure that what you build today remains compliant not just next year, but for a decade. Market participants need certainty.

The unresolved challenge right now is that stablecoins run on blockchain networks, but the blockchain space itself—and the rest of the digital asset space—doesn't yet have a complete federal regulatory framework. That's why the Senate's consideration of the CLARITY Act is so significant. Here's an analogy: it's like having phone regulations but no rules for cell towers. Half the technology sector has a regulatory framework, while the other half remains in perpetual uncertainty. Even in this ambiguous environment, entrepreneurs continue to build and try to navigate the compliance boundaries as best they can. There are two paths for policymaking. Agencies like the SEC and CFTC have issued some guidance. But as you noted at the outset with the history of the internet, a mature industry's long-term development depends on formal legislation. That's why we believe legislation is essential, and why the CLARITY Act is so critical.

Robert: It's not that there are no rules at all right now. As you said, stablecoins have their own legislation, but it only covers a small part of the market. A vast expanse of the sector remains in a regulatory vacuum. Marc, why does the entire crypto sector need regulation, and why can't the timing be delayed any further?

Marc: The U.S. financial system has gone through similar arcs multiple times. The most classic case is the Securities Act, which created the SEC and established the regulatory framework for the stock market. We're not asking for subsidies, trade protection, or special favors. We just want a stable, long-term regulatory framework that lets market participants operate in compliance. In many ways, this is a perfectly reasonable ask.

Chris: For example, there's currently no federal regulator for crypto exchanges in the U.S. The NYSE and Nasdaq all operate under federal regulatory frameworks. A large part of the CLARITY Act is about filling this gap—granting the SEC and CFTC regulatory authority, establishing disclosure requirements, anti-fraud rules, insider trading regulations, and building a regulatory system consistent with other traditional financial markets—the mature market rules Marc just mentioned. The FTX collapse is the best evidence. That exchange lacked proper audit and regulatory oversight, which ultimately led to a crisis. Once crypto exchanges are federally registered, they'll be subject to standardized audits. The Act gives federal regulators full enforcement authority. Any platform that can't meet compliance requirements won't be allowed to operate in the U.S. The bill's provisions are detailed and complex, and the legislation has maintained bipartisan collaboration throughout. Many of us have been pushing the CLARITY Act forward for the past seven years; it's been more than a year since the House passed the bill text, and the Senate has been reviewing and revising for a full year now. There's ample precedent for bringing the financial industry under regulation. The bill applies mature industry regulatory principles to the crypto sector. It clearly defines covered entities—crypto intermediaries will need to comply with the same anti-money laundering and Treasury Department regulations as traditional financial institutions. The Fraternal Order of Police, one of the nation's largest law enforcement organizations, recently publicly endorsed the CLARITY Act. Some opponents claim the bill lacks adequate enforcement provisions, but that's simply not the case.

The Gray Regulatory Zone Enables Illicit Financial Activity

Robert: Let's talk about one of the core issues at the center of current debates—illicit financial activity is a key focus.

Chris: The current boundaries of law and regulation are extremely murky. Over the long term, when regulatory gray zones exist, the industry tends to fall into a "race to the bottom."

I served on Coinbase's board for a long time, and Marc is still a Coinbase director. Coinbase is a domestic company that takes regulatory compliance very seriously. But compliance requires enormous investment and slows down product iteration. Every year, new offshore trading platforms emerge, skipping much of the compliance cost and competing on lower fees and faster product updates. Regulatory ambiguity ultimately benefits speculators and bad actors. Sound regulation—which the CLARITY Act moves toward—can clearly delineate the regulatory scope.

For example, under the CLARITY Act, if you're a financial intermediary, like Coinbase or any business that custodies user funds, you must comply with exactly the same regulations as companies like Stripe and PayPal. The bill's provisions clearly define this. As I said, multiple law enforcement agencies have also publicly supported the legislation.

Would the CLARITY Act facilitate sanctions evasion? Privacy is not the same as anonymity

Robert: Marc, there's a critical view that this bill would help market participants evade sanctions. How do you see it?

Marc: Most national security professionals I've spoken with don't share that view. On-chain transactions leave a complete trail, which stands in stark contrast to many current terrorist financing methods. Even within the industry, some claim that crypto is inherently anonymous and transactions can't be traced. That view fundamentally stems from a lack of understanding of the technology.

Chris: On the contrary, many teams are now investing heavily in R&D to build blockchains with privacy features precisely because the vast majority of public chain transactions are fully transparent and auditable. We believe privacy features have legitimate value, but they're by no means for illegal purposes. Imagine you need to pay for healthcare or financial services—you wouldn't want everyone to see those transactions. Traditional finance also has privacy needs. It's a perfectly reasonable requirement.

With the GENIUS Act in place and the proliferation of dollar stablecoins, the privacy topic is starting to be discussed in Washington policy circles. We welcome that. It reminds me of the early internet era. Marc, wasn't it your team that introduced SSL?

Marc: That's right.

Chris: For those unfamiliar with the history, HTTPS technology came out of Netscape. At the time, many people questioned why ordinary people would need encrypted communication. Sure, some bad actors might exploit encryption, but over time everyone realized encryption is indispensable. 99.9% of use cases are legitimate—ordinary people use encryption for everyday things like online banking.

Your team even went to Congress for hearings back then.

Marc: That battle lasted four years, and it's strikingly similar to where we are now. When we launched Netscape, it was the first consumer software with public-key encryption to achieve widespread adoption. At the time, encryption was classified as a munition under the International Traffic in Arms Regulations (ITAR). In other words, encryption was regulated at the same level as Tomahawk missiles, and Netscape was placed in that same category.

So we could only sell the version with strong encryption domestically; the export version had to be deliberately weakened. Needless to say, overseas consumers were not happy. The product packaging explicitly stated "weak encryption, please don't trust it," and overseas sales naturally suffered.

Overseas competitors quickly seized the opportunity, cloning browsers with full encryption. Overseas users abandoned our product for foreign competitors. Back then, we were a bunch of young people going to Washington to make our case, and officials often responded with confusion.

The debate ultimately came down to a core tension: would encryption be abused by bad actors? Or is encryption a foundational tool for building trust and supporting legitimate commerce, serving law-abiding citizens? The real question is one of trade-offs: do we want to completely eliminate cybercrime risk, or do we want online commerce platforms like Amazon to function properly? The two are deeply intertwined. It took four years of education and communication, but eventually the rules were updated. The world didn't descend into chaos. First, as Chris said, the vast majority of encryption use cases are legitimate. More importantly, U.S. companies maintained their dominance in the industry. It wasn't just Netscape—the global internet economy has long been led by American companies.

Public Official Ethics Rules and Market Regulation Should Be Discussed Separately

Robert: Let's continue with other challenges facing the bill. Another major controversy is public ethics. Some argue that since the President and his family hold interests in crypto-related businesses, the bill's passage would benefit its supporters. How do you respond to such criticism?

Chris: This isn't my area of expertise, but as an ordinary citizen, I believe public officials should follow ethical guidelines. But such rules shouldn't target only the crypto industry. Public official ethics standards should apply to stock trading and other financial assets as well—that's a reasonable demand.

Second, even setting aside specific ethics provisions, the CLARITY Act would impose significant new constraints on crypto market participants: mandatory disclosure of crypto asset risks and holdings, plus lock-up rules. All market participants, including public officials, would face stricter regulation.

Third, from a political standpoint, the current situation is frustrating. Normally, public ethics regulations and industry regulation bills advance separately. The crypto industry is being held to a different standard. That said, society and policymakers can certainly have a rational discussion about public ethics rules that apply to all financial assets, including crypto. I hope all parties can reach consensus and move the bill forward. Our core goal is to complete crypto industry regulation legislation.

Marc: By the way, the bill's restrictions on public officials' use of crypto assets are actually stricter than the rules for stock trading.

Chris: I'd add that the general public's perception of crypto is largely limited to trading and speculation. Many people overlook that through applications like stablecoins, crypto technology is becoming an everyday tool. If the industry continues to develop, these applications will further penetrate ordinary people's financial lives. When crafting regulations, it's necessary to distinguish between two scenarios: speculative asset trading versus everyday technology use. Public officials should have the opportunity to use cutting-edge technology.

Robert: So the bill already includes public ethics provisions, and the ethics issue itself should be viewed separately from building the crypto market regulatory framework.

Chris: Looking at the current political situation objectively, the existing bill draft already incorporates ethics-related provisions. Those provisions are still in the negotiation phase. I hope consensus can be reached. From our perspective, the most important goal is ending the years of regulatory gray zone—a gray zone that continues to fuel a race to the bottom in the industry. The CLARITY Act may not be perfect, but it's far better than the status quo.

The Stablecoin Interest Debate: Banks vs. the Crypto Industry

Robert: Let's return to stablecoins. The stablecoin regulatory provisions in the bill are hotly contested, with banking lobby groups voicing strong opposition—JPMorgan's stance being particularly notable. Banks oppose stablecoin balances generating interest, fearing that if consumers can earn interest on stablecoins, they'll withdraw deposits from commercial banks, triggering deposit outflows.

Chris: The final bill text largely adopts the banking industry's demands, prohibiting stablecoin balances from directly accruing interest. The bill defines that any product that functionally and economically equates to a bank deposit cannot pay interest. Of course, there's some room within the rules. Say a user makes several purchases with a stablecoin wallet at Walmart each month—you can set up a spending rewards mechanism. As long as it doesn't constitute interest on balances, it's compliant.

Robert: Similar to credit card points or purchase reward mechanisms.

Chris: Exactly. If the rules were tightened further, consumer reward systems like Starbucks points would be affected. It took extensive negotiations among many parties to reach this compromise. It wasn't an easy concession for the crypto industry, but we fully support the bill as a whole.

Robert: The public confrontation between Brian Armstrong and Jamie Dimon perfectly illustrates this battle. But JPMorgan has a massive internal blockchain team and has already launched on-chain tokenized deposit products.

Chris: JPMorgan is massive. Many large banks are building on blockchain. Once the CLARITY Act passes, a lot of bank blockchain projects will scale up significantly. Corporate exploration of new technology is no longer limited to small experiments. We've been in ongoing conversations with many institutions. Several projects are already in pilot stages and will fully roll out once regulatory certainty is established. Institutions broadly see enormous opportunity.

The existing banking system took shape through complex historical circumstances, and we can't simply blame the banks. The whole system is intricate, and much of the underlying technology is outdated. Blockchain happens to provide a unified framework for the financial industry to modernize: institutions can work together on blockchain to bring financial infrastructure into the 21st century. Blockchain doesn't just solve technical problems—it also addresses multi-party coordination barriers.

In conversations with institutions, it's clear that the banking industry is broadly optimistic about the sector's prospects—JPMorgan included. I'm not alone in this assessment: Goldman Sachs CEO David Solomon has publicly endorsed the CLARITY Act. Fidelity, BlackRock, and other major financial institutions have also publicly supported it and are building related businesses. Leading fintech companies like Stripe are deeply involved