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

Original Translation: Jiahuan, ChainCatcher

The Senate Banking Committee just voted in a bipartisan manner to advance crypto "market structure" legislation (i.e., legislation concerning market division, regulatory responsibilities, and trading rules), marking 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.

Over the past decade, the lack of clear regulation in the U.S. has distorted the market, stifled innovation, and exposed consumers to significant risks. CLARITY will put an end to this.

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

With today's passage through the Senate, this foundational legislation, crucial for the entire crypto industry, is closer than ever to becoming law.

Everyone from startup founders and consumers to large traditional financial institutions and investors migrating onto the chain will benefit.

Next, the bills from the two congressional committees will be merged into a complete bill for a full vote in the Senate. If passed, it will go to the House for approval, and if successful there, 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 have had to patch together existing regulations to oversee this industry, and this approach has been a complete failure.

This has not only caused confusion in legal interpretation and inconsistent stances but has also led to significant government overreach and abuse of power.

This regulatory uncertainty has not only hindered innovation but has also provided fertile ground for bad actors. Among the highly publicized negative events in the crypto space over the past ten years, malicious actors could easily launch products that exploited regulatory loopholes, taking advantage of consumers.

Meanwhile, responsible builders have faced a questionable approach of "regulation by enforcement" instead of legislation.

This uncertainty has pushed crypto development overseas. When the U.S. fails to leave room for innovation, entrepreneurs look for other jurisdictions, including those that have already implemented more refined regulatory systems.

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

Fortunately for U.S. innovation, no other jurisdiction has gotten the regulatory approach entirely right yet. However, tailored regulatory frameworks will eventually attract and concentrate entrepreneurial activity in those regions, along with the economic value and jobs they create.

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

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), giving rise to a new model: open monetary infrastructure.

After this bill was 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 will benefit.

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

They also need a framework that acknowledges the potential of blockchain networks to drive a significant and novel technological platform shift. This shift must transcend the speculative applications spurred by poor policies, allowing people to build beyond the initial financial use cases (which are already covered by existing U.S. regulations).

CLARITY is tailored precisely to establish such a clear framework.

How We Got Here

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

The Financial Innovation and Technology for the 21st Century Act of 2024, or "FIT21" (HR 4763); and the Digital Asset Market Clarity Act of 2025 (HR 3633).

Similar to the current Senate bill, both FIT21 and the House version of CLARITY sought to provide a path for blockchain networks to:

· Safely and effectively launch blockchain networks and digital assets 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 votes in favor to 136 against, with 71 Democrats supporting).

The House version of CLARITY passed in July 2025 with even greater bipartisan support (294 votes in favor to 134 against, with 78 Democrats supporting).

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 in the House and improves upon previous bills in several key areas (detailed below). This bill has been progressing through the Senate for several years, with the fastest pace in the past year:

· June 2022, Senators Lummis and Gillibrand first introduced the Lummis-Gillibrand Responsible Financial Innovation Act, the first bipartisan legislative proposal aimed at establishing a comprehensive regulatory framework for the crypto industry.

· July 2025, the Senate Banking Committee (which oversees the SEC) released a discussion draft of the legislation under its jurisdiction, merging and unifying approaches from both the Lummis-Gillibrand Act and the House version of CLARITY.

· It issued a request for information, collecting feedback and legislative solutions to balance innovation with maintaining financial stability and protecting consumers.

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

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

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

· Today (May 14, 2026), the Senate Banking Committee just advanced the portion 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 engine of U.S. innovation. This path is well-established: entrepreneurs raise capital, succeed, and generate profits to reward shareholders.

U.S. law has meticulously refined this model, specifying responsibilities and emphasizing transparency to align incentives and manage trust in founders and operators.

This framework is suitable for building a company. But it is not suitable for building a network.

The existing legal framework presumes a singular controller and requires that control to persist. But networks don't have a controller. Networks coordinate people, capital, and resources through shared rules, not centralized ownership.

When a framework designed for companies is forced onto a network, the network gets distorted 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 created corporate-style networks with immense centralized power — payment systems, e-commerce marketplaces, social platforms, app stores — which capture a disproportionate share of the value created by participants.

A rideshare user pays $100 for a ride; the driver gets only a small portion. A musician creates a song streamed millions of times, receiving only pennies for every dollar earned.

Wherever corporate-style networks dominate, the vast majority of value flows to the intermediary. Traditional corporate law protects these intermediaries and their investors, while users, creators, and workers lack protection.

For most of the internet era, this trade-off was unavoidable. Open protocols lacked a sustainable economic model to compete with the capital and coordination capabilities behind corporate networks.

Blockchain changed this.

Blockchains, and the software protocols built upon them, have given rise to a new type of system: blockchain networks. These networks are designed to be decentralized, operate according to transparent rules, and exist as shared infrastructure owned and operated by their users.

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

Blockchain makes it possible "to build networks that truly function like networks, not like companies."

Blockchain technology is at a critical juncture. Past platform shifts — personal computers, mobile phones, the internet — were among the most important technological innovations in human history. The emergence of artificial intelligence is quickly becoming one as well.

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

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

If this control continues to be centralized, so does the ability to shape outcomes, restrict access, and extract value: companies will dominate how the network operates and decide who benefits from it.

Decentralized blockchain networks offer an alternative: 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 that have the properties of a digital public good — 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 alternative a viable path.

After CLARITY enters full Senate consideration and updates emerge, we will share more details on what it specifically means for crypto builders.

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

And as more projects operate within the U.S. regulatory perimeter rather than outside it, regulators and enforcement agencies 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 framework: the GENIUS Act unleashed a wave of innovation overnight. Today, we already see crypto in several mainstream applications, from stablecoins to AI agents, and more — the best is yet to come.

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