GENIUS Act and CLARITY Act: A Pivotal Moment in U.S. Crypto Regulation

In the summer of 2025, the United States took a significant step forward in regulating digital assets. Two landmark pieces of legislation – the GENIUS Act and the CLARITY Act – were passed, marking a pivotal year for cryptocurrency regulation. These acts aim to provide clarity, stability, and oversight to the rapidly evolving crypto landscape.

The GENIUS Act: Establishing a Federal Framework for Stablecoins

The Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act was signed into law by President Donald Trump on July 18, 2025. This legislation introduces the first-ever federal regulatory system for stablecoins – cryptocurrencies pegged to assets like the U.S. dollar. The act mandates that stablecoin issuers maintain 100% reserve backing with liquid assets such as U.S. dollars or short-term Treasury bills. Additionally, issuers are required to make monthly public disclosures of their reserve compositions, ensuring transparency and trust in the system.

The GENIUS Act also outlines the regulatory responsibilities of various entities. Insured depository institutions and credit unions that issue payment stablecoins are subject to oversight by their primary financial regulators. Federally licensed nonbank stablecoin issuers fall under the jurisdiction of the Office of the Comptroller of the Currency (OCC).

This legislation aims to foster innovation while ensuring financial stability and consumer protection in the digital asset space.

Key Provisions of the GENIUS Act:

• Reserve Requirements: Stablecoin issuers must back their tokens with 100% reserves in liquid assets such as U.S. dollars or short-term Treasury securities.
• Monthly Disclosures: Issuers are required to publicly disclose the composition of their reserves monthly, enhancing transparency and consumer trust.
• Regulatory Oversight: Issuers affiliated with insured depository institutions are overseen by their primary financial regulator, while nonbank issuers are regulated by the Office of the Comptroller of the Currency (OCC).
• Anti-Money Laundering (AML) Measures: The act includes provisions to strengthen anti-money laundering (AML) compliance – for instance requiring stablecoin issuers to implement AML and sanctions-programs and publish annual compliance certifications. However, critics argue that key loopholes remain: Transparency International U.S. warns that AML obligations do not clearly extend to all digital-asset service providers such as exchanges and foreign issuers, raising the risk of illicit finance and sanctions evasion.

The CLARITY Act: Defining Digital Asset Classification

Following the passage of the GENIUS Act, Congress introduced the Digital Asset Market Clarity (CLARITY) Act. This bill seeks to clarify the classification of digital assets, determining whether they are considered securities or commodities. 

The CLARITY Act assigns primary oversight of “digital commodities” — defined as tokens intrinsically linked to a blockchain and whose value derives from that system — to the CFTC, giving it exclusive jurisdiction over spot-market trading of those assets provided they meet the statutory criteria. At the same time, the SEC retains its longstanding authority over assets sold as investment contracts (i.e., securities), including fundraising offers and issuer disclosures. The Act also creates a new exemption under the Securities Act for investment-contract offers involving units of a digital commodity tied to a “mature blockchain system,” subject to caps and disclosure requirements. Through this bifurcated framework, CLARITY seeks to delineate regulatory roles based on how the token functions, when it was issued, and how decentralised its underlying blockchain is.

The CLARITY Act introduces exemptions for certain decentralized finance (DeFi) activities, ensuring that genuinely decentralized systems are not burdened by unnecessary regulatory oversight. These carve-outs apply to non-custodial blockchain operations, such as developing or maintaining blockchain protocols, providing user interfaces for decentralized networks, and validating or confirming transactions. According to legal analyses by WilmerHale and McMillan LLP, these exemptions are designed to exclude activities that do not involve direct custody of customer funds or intermediary control, provided the blockchain networks are sufficiently decentralized or mature.

By establishing clear definitions and regulatory responsibilities, the CLARITY Act aims to reduce uncertainty and promote growth in the digital asset market.

(Sources: WilmerHale, “Congress Set to Bring Clarity to Digital Asset Market Structure,” July 2025; McMillan LLP, “Overview and Analysis of the CLARITY Act,” July 2025.)

Key Objectives of the CLARITY Act:

• Jurisdictional Clarity: The act seeks to establish clear guidelines on when a digital asset qualifies as a security or a commodity, determining the appropriate regulatory body.
• Decentralization Considerations: It introduces a framework to assess the decentralization of digital assets, potentially exempting certain decentralized finance (DeFi) platforms from specific regulatory requirements.
• Regulatory Harmonization: By providing clear definitions and guidelines, the CLARITY Act aims to harmonize the regulatory approach across federal agencies, fostering a more predictable environment for digital asset markets.

The Broader Impact: A New Era for Crypto Regulation

The passage of the GENIUS and CLARITY Acts represents a significant shift in the U.S. government’s approach to cryptocurrency regulation. These laws provide a comprehensive framework that addresses key aspects of the digital asset ecosystem, including stablecoin issuance, digital asset classification, and decentralized finance activities.

Industry leaders have expressed optimism about the potential of these legislative measures to foster innovation and attract investment. For instance, Mastercard’s Executive Vice President, Jesse McWaters, highlighted that the GENIUS Act signals a new era of regulatory clarity and confidence in digital assets.

However, some critics have raised concerns about the potential for increased surveillance and the concentration of financial power among large tech companies. Opponents argue that the legislation could empower Big Tech in the financial space and may lack sufficient anti-money laundering protections.

• Elizabeth Warren (U.S. Senator) warns that the GENIUS Act could open the door for tech giants and large commercial players to dominate financial services. She argues the bill may effectively allow entities such as Amazon, Meta Platforms or Elon Musk’s firms to issue their own currency-like instruments, thus blurring the line between commerce and banking.
• Transparency International U.S. (anti-corruption NGO) flagged that the GENIUS Act’s anti-money laundering (AML)/counter-financing-of-terrorism (CFT) obligations are too narrow – for example, they may not clearly cover secondary markets, offshore issuers, or trading platforms that interface with stablecoins.

Despite these concerns, the passage of these acts has had a positive impact on the crypto market. Following the signing of the GENIUS Act, the global cryptocurrency market capitalization surpassed $4 trillion for the first time, driven by the introduction of regulatory clarity and increased investor confidence.

Looking Ahead: The Future of Crypto Regulation

The summer of 2025 marks a landmark period in the evolution of cryptocurrency regulation in the United States. The passage of the GENIUS Act and the progression of the CLARITY Act establish a strong foundation for digital asset regulation, reflecting a concerted effort by U.S. lawmakers to create a comprehensive and coherent legal framework.

While these acts provide clarity and stability, ongoing efforts will be essential to address emerging challenges and support the continued growth of the crypto industry. Future legislative measures may focus on areas such as anti-money laundering compliance, cross-border regulatory coordination, and the integration of blockchain technology into traditional financial systems.

As the digital asset landscape evolves, the U.S. government’s proactive approach to regulation will play a crucial role in shaping the future of cryptocurrency and blockchain technology. Cryptoverse Lawyers will continue to monitor these developments closely, providing timely insights and expert guidance to help clients navigate the dynamic and evolving regulatory environment.

Frequently Asked Questions