The CLARITY Act: What Crypto Legislation Means for Token Issuers

The Digital Asset Market Clarity Act creates a new legal category for sufficiently decentralized digital assets. If it passes, it is the most significant change to crypto regulation since the SEC applied Howey to tokens.

The Digital Asset Market Clarity Act (commonly called the CLARITY Act) has been through multiple versions in both the House and Senate. In its current form moving through Congress in early 2026, it represents the most comprehensive attempt to create a regulatory framework for digital assets since the SEC began applying the Howey Test to token offerings in 2017.

For token issuers, the CLARITY Act's key provisions create new possibilities — and new compliance obligations — that could reshape how tokenized assets are structured and distributed.

The Digital Commodity Classification

The most significant provision of the CLARITY Act is the creation of a "digital commodity" classification for digital assets that have achieved sufficient decentralization. A digital commodity would be regulated by the CFTC rather than the SEC — a significant change because commodity regulations are generally less restrictive for secondary market trading than securities regulations.

The decentralization test is multi-factor, examining whether: no single entity controls 20% or more of the outstanding supply, the network is primarily controlled by its users rather than developers, and the blockchain is not dependent on the efforts of a specific promoter for its continued operation. Bitcoin clearly qualifies. Ethereum arguably qualifies. Most early-stage tokens do not — but the framework creates a path for tokens to eventually "graduate" from securities to commodities as their networks mature.

The 3-Year Securities Safe Harbor

The CLARITY Act's proposed 3-year safe harbor allows token projects to raise capital as securities while building toward decentralization — without being required to register as investment companies or broker-dealers during the development phase. This is a practical acknowledgment that most useful networks require active development before they can be decentralized.

During the safe harbor period, issuers must: file semi-annual disclosures with the SEC, prohibit insider trading, and demonstrate progress toward decentralization through defined metrics. Projects that fail to achieve the decentralization threshold within 3 years remain regulated as securities.

Stablecoin Provisions

The CLARITY Act creates a federal licensing framework for stablecoin issuers — a separate regulatory track from securities. Issuers of payment stablecoins (1:1 backed, redeemable on demand) would register with either a federal bank regulator or their state banking regulator. This would formalize the status of RLUSD, USDC, and USDT under federal law for the first time.

For RLUSD specifically, this provision is significant. Ripple launched RLUSD with BNY Mellon as custodian and New York DFS approval. A federal stablecoin framework would expand RLUSD's regulatory recognition across all US jurisdictions simultaneously.

What Changes for Token Issuers if It Passes

If the CLARITY Act passes in its current form, the practical changes for token issuers include: a clearer path for utility token offerings that don't require SEC registration (if the token meets decentralization criteria), reduced secondary market restrictions for tokens classified as digital commodities, and formal legal clarity on which regulatory body has jurisdiction — eliminating the current dual-agency ambiguity.

Even without the CLARITY Act, the post-Ripple enforcement environment has shifted significantly. The SEC's revised Staff Bulletin in early 2025 narrowed the agency's enforcement priorities for digital assets, and multiple new guidance documents have clarified the boundaries of securities analysis as applied to tokens.