House Democrats have raised concerns over the CLARITY Act, a proposed crypto market structure bill that seeks to establish a regulatory framework for digital assets while potentially allowing traditional finance firms to evade regulations. During a recent hearing organized by the Democrats, witnesses highlighted significant issues within the legislation, noting that its regulatory gaps could have broad implications beyond the cryptocurrency market. The bill, as it stands, would exempt most crypto assets from SEC oversight, posing risks that traditional financial institutions may exploit to circumvent existing regulations. Experts warned that the creation of a two-tier system for categorizing digital assets could lead issuers to claim their tokens fall outside the realm of traditional securities offerings, presenting a challenge for regulatory enforcement. Activists and politicians voiced that without robust protections, the bill could facilitate an environment that undermines long-standing investor protections, raising red flags about the potential for financial instability.

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