Revised CLARITY Act Targets ‘Non-Decentralized’ DeFi Operators

A revised version of the CLARITY Act has been posted on Senator Cynthia Lummis’ website, directing U.S. regulators to assess whether controllers of “non‑decentralized finance trading protocols” must comply with securities, commodities and anti‑money‑laundering (AML) rules.

Definition of Non‑Decentralized Protocols

The bill defines a non‑decentralized protocol as one whose functionality, operation, or rules can be materially altered by a person or coordinated group, or where controllers can restrict users or where transactions are not governed solely by transparent, pre‑established code.

Regulatory Responsibilities

Under the proposal, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) would develop activity‑based rules covering registration, conduct, disclosure, record‑keeping and supervision. The Treasury Department would clarify how existing Bank Secrecy Act obligations apply to the identified controllers.

Scope and Exemptions

• Software and distributed‑ledger systems would not be required to register in their own capacity.
• Participation in an incident‑response or security council would not, by itself, establish control over a protocol.

Legislative Timeline

The revised text arrived ahead of a procedural Senate vote scheduled for September 15. Advancing the measure requires 60 votes, meaning Republican support from Democrats is needed amid ongoing disagreements over ethics, AML protections and stablecoin rewards.

Industry Reaction

Crypto Council for Innovation CEO Ji Hun Kim called the upcoming vote a “pivotal moment” for digital assets and U.S. leadership, emphasizing the need for a framework that balances consumer protection with business standards.

Coinbase CEO Brian Armstrong told CNBC the CLARITY Act is “ready to get a yes vote,” noting that previously raised “must‑have issues” have been resolved, though ethics negotiations remain active.

Remaining Concerns

Democratic Senator Ruben Gallego warned against a fast vote without resolving disputes on ethics and stablecoin yield, cautioning that a rushed result may be undesirable.

If the legislation does not advance, the SEC and CFTC could pursue rulemaking and innovation exemptions using existing authority.