The hard truth is that the Clarity Act is an anti-crypto bill

Now that congressional action on the Digital Asset Market Clarity Act has been punted until mid-September, there has never been a better time to ask whether the Clarity Act is actually good for crypto.

In Washington, the “Clarity Act” and the “crypto bill” have become interchangeable. The assumption is that if you support crypto, you support Clarity; if you oppose Clarity, you oppose crypto.

That framing is remarkably convenient. It is also wrong.

For years, the crypto community endured congressional paralysis as a parade of crypto bills stalled out. (Let’s observe a small moment of silence for the Token Taxonomy Act, the DCCPA, and FIT21, to name a few inhabitants of the legislative graveyard.)

Throughout the legislative paralysis, the crypto community survived the Gensler era of enforcement actions that should have never been brought, as well as the catastrophic collapses of Celsius, Voyager, and FTX, all made worse because the laws were insufficient to govern the industry.

At some point, almost any comprehensive bill gave the illusion of progress.

But if we look past the name, Clarity isn't really a bill about enabling crypto, the technology. It is a bill about enabling crypto middlemen.

Crypto was supposed to remove middlemen

Crypto’s origin story begins with the Bitcoin whitepaper, published amid the 2008 financial crisis. “Trusted third parties,” i.e., middlemen or intermediaries, may have once been necessary, but they are also points of failure. The combination of cryptography with the ubiquity of the internet could safely replace those points of failure with peer-to-peer transactions.

That was the point. Securely enabling a peer-to-peer financial system through technology.

Yet, reading the text of the ClarityAct, you’d be forgiven if you thought being pro-crypto meant being pro-middlemen. The legislation is built around exchanges, brokers, custodians and other intermediaries.

In my review, only 2–4% of the bill’s language focuses on the underlying technology, while 44–77% focuses on intermediaries. (The figures vary across the House-passed bill, the Senate Agriculture Committee draft, and the Senate Banking Committee draft.)

It’s as if Congress were to propose its first “medicine” bill. But rather than establishing any requirements for proof of effectiveness, testing and safety, or labeling, Congress spent most of its ink on how the Walmarts and CVSs could sell to us.

Where are the rules for decentralized protocols? What governance standards ensure safety, security, and reliability? Would the rules prevent, or create adequate remedies for, collapses and hacks like Terraform, Prime Trust, or Bybit? As the centralized companies learned long ago, if you don’t have rules, you’ll end up on the regulatory enforcement menu somewhere.

Democrats cannot build a credible crypto policy around being anti-Trump. They need to decide what they are actually for.

If we continue along our current trajectory, those left out will be the everyday people crypto was supposed to empower.

Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.