House Democrats expressed concerns about the CLARITY Act during a recent hearing, highlighting potential regulatory loopholes that could allow traditional financial firms to evade regulations by adopting blockchain technology. The bill aims to create a framework for regulating most digital assets but has raised alarms among Democrats regarding its implications for U.S. securities laws. Amanda Fischer, Policy Director at Better Markets, cautioned that by exempting crypto assets from traditional regulations, the bill might encourage traditional financial institutions to bypass long-standing rules to reduce costs. This concern was echoed in the testimonies presented at the hearing, emphasizing that such regulatory gaps would not be limited to the crypto industry but could extend into broader financial practices. The potential for significant shifts in how financial functions are conducted on blockchain platforms was a key point raised by witnesses, indicating that the bill might inadvertently promote a two-tiered system that favors digital commodities over established securities.

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