Nearly four years have passed since FTX — the crypto exchange run by Sam Bankman-Fried and headquartered in the Bahamas — filed for bankruptcy. In that time Congress has held hearings, the Justice Department has won a conviction for misappropriating customer funds, and creditors have recovered close to $10 billion.
What Congress hasn’t done is establish safeguards that could have prevented or curtailed the fraud sooner.
Congress has been trying for years. The House twice passed market structure legislation that would have given regulators the authority to stop FTX, most recently in July 2025 by a bipartisan vote of 294 to 134. The Senate Banking Committee and Senate Agriculture Committee cleared their own version of the legislation — the Digital Asset Market Clarity Act — earlier this year. It’s about to get its first shot on the Senate floor.
Tomorrow, on September 15, the Senate votes on whether to open debate. If the bill becomes law, exchanges serving U.S. consumers will have to adopt safeguards that FTX lacked. If the bill doesn’t, those gaps will remain.
FTX did not fail because regulators missed a sophisticated scheme. There was nothing sophisticated about it. FTX simply hid that they misappropriated customer assets, because there were no independent custodian, segregated assets, or disclosure requirements. And there was no regulatory oversight ensuring those types of safeguards were followed. The firm collapsed when their fraud was uncovered and customers tried to withdraw their funds, exposing an $8 billion hole.
The safeguards that could have prevented this have existed for nearly a century, but they simply do not extend to spot digital asset markets. Congress required futures commission merchants to segregate customer property under the Commodity Exchange Act of 1936. Broker-dealers holding customer assets are subject to custody, reserve, capital, disclosure, and examination requirements, including the Securities and Exchange Commission’s Customer Protection Rule. The Securities Investor Protection Act of 1970 provides an additional framework when a broker-dealer fails.
Far from exotic, these are the established rules of every well-regulated market.
Which means the status quo — the thing everyone in Washington has spent years complaining about — is not a neutral state. The question is no longer whether digital asset markets will exist. It is what rules will govern them.
The CLARITY Act brings digital commodity brokers, dealers, and exchanges inside the regulatory perimeter and applies the boring, proven machinery of traditional financial regulation to them: segregation of customer property, qualified custody, restrictions on conflicts involving affiliates, mandatory disclosure, listing standards, limits on insider selling, and a named compliance officer answerable for the firm’s adherence to the law.
It settles the jurisdictional question between the Securities and Exchange Commission and the Commodity Futures Trading Commission, which today is open to expansive and weaponizable interpretation. It replaces a project’s unfalsifiable claim to be “sufficiently decentralized” with a statutory test based on control. And it imposes issuer disclosure obligations, as well as lockup periods and insider-trading restrictions, much as we already do for public stocks.
In short, CLARITY means that digital asset markets and intermediaries would have to follow rules similar to those followed by traditional markets and intermediaries already.
Three objections have kept CLARITY off the floor: first, that the idea that legislation “deregulates” crypto; second, that officials who hold crypto stand to benefit from it; and finally, that stablecoin rewards will drain deposits out of the banking system. Each deserves a fair hearing, but none is an argument for preserving the status quo.
First, that CLARITY is “deregulation” that will let crypto run wild. This rests on a false premise: that all of crypto is already subject to the securities laws. It is not, and courts have said so repeatedly. The reach of the securities laws over digital assets is uncertain, and it is not seriously disputed that many digital assets, bitcoin and ethereum among them, are not securities.
CLARITY settles a fight between two untenable positions — that everything onchain is a security, and that nothing is. Neither has ever been true, and the cost of leaving the question unresolved falls on consumers. The Wild West that opponents fear is the thing we already have.
The absence of a clear rulebook is also what helped FTX pass for a legitimate business. An offshore exchange with no meaningful disclosure obligations competed directly against domestic firms trying to comply with a patchwork of state requirements, uncertain asset classifications, and shifting enforcement positions. That is not a market. That is a penalty on good behavior.
Second, that officials who hold crypto stand to benefit from it. The concern is legitimate. Public officials should not profit from industries they oversee. But that is a question of government ethics, and it applies to every asset an official can own. Whether a multitrillion-dollar market should operate under federal rules is a question of financial regulation. Collapsing the two means answering the second badly to make a point about the first — and, in the process, leaving millions of market participants unprotected.
Nothing about the concern is specific to crypto. Officials trade stocks, hold real estate, and own stakes in private companies, and the conflict-of-interest rules that govern them do not turn on asset class. An ethics regime written one asset at a time invites whack-a-mole, since anyone determined to self-deal can simply route around it. If Congress believes existing rules are too weak, the fix is to strengthen them for everyone, not to hold a market structure bill hostage to a rider that would reach one asset and leave the rest untouched.
As proposed, CLARITY contains unprecedented constraints. Voting it down doesn’t constrain anyone’s holdings. Rather, it leaves them unsupervised. The bill would impose on token issuers the disclosure obligations, lockups, and insider-selling limits that public stock already carries. Today none of that exists. The market opponents describe — opaque assets with no rules — is the status quo they are voting to keep.
Third, that stablecoin rewards will drain deposits out of the banking system. Banks argue that paying interest-like returns on stablecoin balances would create unregulated savings accounts and pull funding away from lending to households and small businesses.
That objection isn’t supported by evidence, but even if it were, the concern has already been met. After months of negotiation, the resulting bill text bars passive yield — any return economically or functionally equivalent to deposit interest — while preserving rewards tied to genuine activity. And the latest draft of CLARITY enables the Treasury Department to add restrictions if evidence of deposit flight does materialize. But this isn’t really about deposits. The White House Council of Economic Advisers put the lending effect of a total ban at roughly $2.1 billion — about two hundredths of one percent of bank lending. This is an anti-competitive argument masquerading as a financial stability one.
Should a version of CLARITY reach the President, it will be a compromise, because that is what legislation is. In exchange for a statutory foundation and clear rules, the crypto industry will come within the U.S. regulatory perimeter. In no case, can anyone argue that this trade is not already significantly better than the status quo.
This isn’t a problem the regulatory agencies can solve on their own. Any commission rule is a rule only until the next commission reverses it, and one that anyone with standing can tie up in court for years. We just watched an entire industry’s legal treatment swing with a change of administration. Firms holding other people’s money should not have to build compliance systems on a framework that may not survive the next election, and institutions will not commit to investing in critical infrastructure under those conditions. Certainty is a product. Only a statute will deliver it.
If the Senate doesn’t act now, the next failure will be bigger.
When FTX collapsed, crypto was still largely a retail market at the edge of the financial system. That is no longer true. Congress passed the GENIUS Act in July 2025 and gave dollar-denominated stablecoins a federal framework. Since then, supply has passed $300 billion, transaction volumes have risen sharply, and stablecoin issuers now sit among the largest holders of U.S. government debt. But GENIUS only provides rules for the dollars moving onchain while leaving all the blockchain rails they travel on untouched.
Everything else onchain has scaled too. Tokenized assets have passed $30 billion in market value and are diversifying well beyond crypto-native products. The Depository Trust and Clearing Corporation, whose depository subsidiary custodies more than $114 trillion of securities, processed its first production transactions involving tokenized assets in July and launches its full tokenization service next month. BlackRock, Fidelity, Franklin Templeton, and Goldman Sachs all run live digital asset businesses, and all have publicly backed the bill.
Bipartisan negotiators in both chambers have already done the hard work. The Senate should finish it. Every week without a rulebook is another week in which an exchange can hold Americans’ assets without the safeguards they take for granted everywhere else.
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