House Democrats raised concerns during a hearing regarding the CLARITY Act, a proposed framework for regulating digital assets. The Act aims to carve out a legal definition for most crypto assets, exempting them from the oversight of the SEC. Critics argue that this legislation contains loopholes that may enable traditional finance firms to circumvent regulations by shifting activities onto blockchain. Amanda Fischer, Policy Director at Better Markets, pointed out that the bill encourages financial institutions to operate with lower costs while evading necessary customer protections and regulations inherent to securities trading. The hearing highlighted that many token issuers may exploit the proposed categorization of crypto assets to avoid regulatory scrutiny. Overall, there is concern that without a stringent regulatory framework, the bill could foster a system where financial activities shift to less regulated environments, undermining the safety and integrity of financial markets.

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