U.S. Crypto Regulation Standoff: How the Clarity Act Exposed Industry Power and DeFi Vulnerabilities

Source: CoinTribune Original Title: Clarity Act Triggers Rifts In U.S. Crypto Industry Original Link: https://www.cointribune.com/en/clarity-act-triggers-rifts-in-u-s-crypto-industry/

The Clarity Act: A Promise of Clarity Turned Gray Area

The Digital Asset Market Clarity Act was originally intended to provide the United States with a modern regulatory framework for digital assets. Presented by Senator Tim Scott, the bill aimed to protect consumers while strengthening national security. However, in practice, the law has produced the opposite effect.

The DeFi Education Fund has actively denounced a series of amendments capable of undermining DeFi technology and worsening conditions for developers. These changes, notably amendments 42 and 45, would allow the Treasury to sanction smart contracts and impose identity verification requirements (KYC) on developers who often have no direct contact with users.

Jake Chervinsky, a recognized lawyer in the crypto sphere, highlighted the core problem:

The latest draft leaves ambiguity over whether all kinds of developers and infrastructure providers might be forced to verify users’ identities, register with regulators, or comply with other rules that do not fit DeFi. Zero tolerance for ambiguity is required.

This text, supposed to clarify the rules, thus plunges developers into concerning legal uncertainty. The paradox is striking: the promised “clarity” becomes a political and technical challenge, threatening the vitality of decentralized finance.

When Crypto Asserts Itself as a Political Force

The Clarity Act episode marks a historic moment. For the first time, a major crypto platform publicly blocked a federal initiative. A simple message from its CEO on social media was enough to push the Senate Banking Committee to suspend the scheduled vote on the law.

This sudden collapse was not a mere procedural delay. It was a revelatory moment in Washington, highlighting both the growing power of the crypto lobby and the increasingly visible rifts between crypto, the banking sector, and traditional finance.

Crypto now possesses real political influence. However, the move has also fractured the industry. Some platforms criticized the decision to stop the process, revealing a paradox: crypto demands regulation but fears it will arrive too quickly and in the wrong form.

In the United States, this standoff demonstrates that crypto regulation is no longer merely a technical question but a matter of power. DeFi risks bearing the cost.

Section 604: The Hidden Battle Over Code Neutrality and Stablecoins

Behind the vote suspension lies a conflict between two Congressional committees. The Banking Committee defends a pro-developer approach, while the Judiciary Committee accuses the bill of opening a “dangerous loophole” in anti-money laundering efforts. Their concern centers on Section 604, which would exempt certain open source software creators from financial licensing requirements.

On the other side, some senators defend the Blockchain Regulatory Certainty Act, which aims to protect those “who simply write code without ever touching users’ funds.” This represents a clear philosophical line: defending code neutrality against potential criminalization.

The debate also extends to stablecoins, the new battleground between traditional banks and crypto firms. Banks seek to limit yields and programmability to retain monetary control, while crypto advocates denounce this as an attempt to suppress innovation. This opposition functions as a zero-sum game: if banks prevail, crypto loses ground.

Key Points

• Vote suspension with no resumption date set
• Section 604 remains at the heart of the conflict between banks, senators, and developers
• Major platforms have blocked federal legislative initiatives
• DeFi Education Fund alerts on anti-DeFi amendments
• Stablecoins represent a new frontline between traditional finance and crypto

The United States continues searching for the right balance between innovation and security. While regulatory clarity remains elusive, the debate over stablecoin regulation and digital asset oversight intensifies, with industry participants and policymakers locked in a struggle to define the future of decentralized finance.