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: Jia Huan, ChainCatcher

The Senate Banking Committee has 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 U.S. has lacked clear regulation, leading to market distortions, stifled innovation, and exposing consumers to significant risks. CLARITY will put an end to this.

The Securities Act of 1933 established investor protection mechanisms, underpinning a century of U.S. capital formation and innovation. The significance of CLARITY is similar—it represents a once-in-a-generation shift in the U.S. financial regulatory landscape, bringing tremendous opportunities.

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

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

Next, the bills from the two congressional committees will be merged into a single bill for a full Senate vote. If passed, it will go to the House for approval, and 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 comprehensive regulatory framework. Regulators have had to patch together existing laws to govern this industry, an approach that has been a complete failure.

This has led to confusing legal interpretations, inconsistent stances, and severe government overreach and abuse of power.

This regulatory uncertainty hasn't just hindered innovation; it has also provided fertile ground for bad actors. In the high-profile negative incidents in the crypto space over the past decade, ill-intentioned individuals could easily launch products that exploited regulatory loopholes and consumers.

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

This uncertainty has driven crypto development overseas. When the U.S. fails to make room for innovation, entrepreneurs seek other jurisdictions, including those that have already implemented more refined regulatory regimes.

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

Fortunately for U.S. innovation, no other jurisdiction has yet gotten the regulatory approach perfectly right. However, 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 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 its passage, this act 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 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 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 a significant and novel technological platform shift. This shift must move beyond speculative applications fueled by poor policy, allowing people to build beyond the initial financial use case (which is already covered by existing U.S. regulations).

CLARITY is specifically tailored to establish such a clear framework.

How We Got Here

Not everything in the CLARITY Act is new. Many 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 21st Century Financial Innovation and Technology Act of 2024, or "FIT21" (HR 4763); and the CLARITY Act for Digital Asset Markets of 2025 (HR 3633).

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

· Launch blockchain networks and digital assets safely and effectively within the U.S.;

· Clarify the regulatory division between the SEC and CFTC in the crypto space, determining whether digital assets are securities or commodities;

· 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, 136 against, including support from 71 Democrats).

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

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

The Senate's 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 (the committee overseeing the SEC) released a discussion draft of legislation within its jurisdiction, merging and unifying approaches from both the Lummis-Gillibrand Act and the House version of CLARITY.

· A request for information was issued to gather feedback and legislative solutions, seeking a balance between fostering innovation and maintaining financial stability and consumer protection.

· 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 a market structure legislative draft within its jurisdiction.

· Today (May 14, 2026): The Senate Banking Committee has 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 driver of American innovation. This path is well-established: entrepreneurs raise capital to start a business, and upon success, generate profits to reward shareholders.

U.S. law has finely tuned this model, stipulating 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.

Existing legal frameworks presuppose control by a single manager and require that this control persists over the long term. However, networks have no controlling entity. Networks coordinate people, capital, and resources through shared rules, not through centralized ownership.

Forcing a company-centric framework onto a network distorts the network into a corporate form. Control becomes centralized, intermediaries re-emerge, and value is extracted from those who depend on the system.

Across the digital economy, this dynamic has spawned 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 receives only a fraction. A musician creates a song streamed millions of times, getting only a few cents 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, but users, creators, and workers lack protection.

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

Blockchain changed this.

Blockchain, along with the software protocols deployed on them, has enabled a new type of system: blockchain networks. These networks are designed for decentralized control, operation under transparent rules, and existence as shared infrastructure owned and operated by users.

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

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

Blockchain technology is at a critical juncture. Previous platform shifts—personal computers, mobile phones, the internet—were among the most significant technological innovations in human history. The emergence of artificial intelligence is rapidly becoming another.

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

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

If this control remains centralized, so does the ability to shape outcomes, restrict access, and extract value: corporations will dictate how networks operate and who benefits from them.

Decentralized blockchain networks offer an alternative path: an infrastructure that no single participant can easily alter, 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, dispersing control, embedding neutrality, minimizing single points of failure, and returning ownership to the users.

The CLARITY Act is designed to make this path viable.

Once CLARITY progresses to a full Senate floor vote and sees updates, we will share more 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 nature of blockchain networks. Builders will be able to operate transparently, raise capital domestically, and build for the long term without making structural compromises due to regulatory ambiguity.

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

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