Clarity Act Bogged Down in DeFi Protection, Will it Secure the May Golden Time?

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The Clarity Act, a key regulatory proposal for the U.S. virtual asset industry and the U.S. cryptocurrency market structure bill, is facing difficulties in congressional passage due to a combination of adverse factors, including strong opposition from judicial authorities regarding the DeFi developer protection clause and demands for ethical regulations from the political sphere.

According to crypto media outlet Coingape on April 28 (local time), Senator Thom Tillis, a member of the Senate Banking Committee, insisted that the concerns of judicial authorities regarding the DeFi clause must be resolved before the Clarity Act is reviewed. The problematic clause protects DeFi developers from being held responsible for users' illegal activities, and judicial authorities such as the police and prosecutors are strongly opposing it, arguing that it hinders the tracking of illicit funds and the crackdown on crime.

On the other hand, the virtual asset industry and the White House consider this clause a top priority that cannot be compromised, making a fierce clash between the two sides inevitable. Senator Tillis, who holds the key to the bill's passage, is strongly demanding the inclusion of ethical regulations in addition to the DeFi clause, threatening to cast a no vote if they are not accepted. He is currently playing a key role in the stablecoin revenue negotiations between the banking and virtual asset industries, indicating a tense tug-of-war.

In this regard, Senator Cynthia Lummis, considered a pro-virtual asset figure, drew a line, stating that the opposition from judicial authorities is not a new major barrier to the bill's passage. She expressed confidence that a compromise is being prepared to protect developers safely while ensuring the authority of judicial authorities to hold criminals accountable, and that the legislation will be completed after a committee review within May, allowing the U.S. to lead the free asset market, including Bitcoin (BTC).

However, the final passage of the bill is still expected to be a thorny path. The Senate is scheduled to go into a 5-week long recess starting in August ahead of the midterm elections, making the actual legislative deadline very tight. Financial services firm Galaxy Digital predicted a 50% chance of the bill passing this year but warned that if it does not pass the Senate Banking Committee review by May, the possibility will become even slimmer.

Furthermore, additional political variables are intertwined, such as the Democratic Party's demand for a bipartisan composition of the U.S. Securities and Exchange Commission (SEC), where Republicans currently hold 3 out of 5 seats. From stablecoin revenue issues to ethical regulations and DeFi protection clauses, the biggest challenge determining the fate of the U.S. virtual asset market structure bill this year is how quickly and smoothly the Senate can resolve these accumulated difficulties.

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