Impending crypto legislation, such as the CLARITY Act, could prevent another massive crypto collapse, according to lawmakers.
The US House Rules Committee met on Monday to discuss three crypto bills, including the Digital Asset Market Clarity (CLARITY) Act, which was introduced at the end of June with the aim of providing a clear regulatory framework for the crypto industry.
Republican representative French Hill said that without these regulations, another FTX-type collapse could occur.
“If the existing ad hoc process remains in place, I’m convinced we’ll continue to see future FTX-like situations because consumers are not afforded the careful protections included in this legislation.”
Another FTX Looms Without Regulations
Hill emphasized that the bill imposes strict consumer and market protections, including a prohibition on co-mingling customer funds. This directly addresses one of FTX’s major failures, where customer deposits were illegally used for other purposes.
There are also capital requirements that ensure firms maintain adequate reserves, record-keeping obligations creating audit trails and transparency, and conflict of interest provisions preventing self-dealing that contributed to FTX’s downfall.
Hill argued that the current system has gaps that leave consumers unprotected.
“For too long, America’s digital assets regime has been delivered in the worst possible world: regulation by enforcement that stifles responsible innovation and an existing commodity and security regulatory framework that’s plagued by gaps that leave consumers unprotected and investors confused.”
Rather than the current regulation by enforcement approach, the bill provides clear definitions of digital commodities and assets, specific disclosure requirements for fundraising, and retail investor protections through “carefully calibrated resale limitations.”
It also gives authority and oversight of centralized exchanges to the Commodities and Futures Trading Commission.
“We are not creating loopholes. We are closing regulatory gaps,” he said.
On Tuesday, July 15, policymakers will begin discussing the bills, and voting will start when the debate ends.
Two More Crypto Bills in Spotlight
In addition to the CLARITY Act, the Guiding and Establishing National Innovation for US Stablecoins ( GENIUS ) Act will also be debated and voted on.
This legislation provides a regulatory framework for stablecoins, setting rules for issuers, reserve transparency, and allowing banks to participate.
The Anti-CBDC Surveillance State Act, which aims to prevent the Federal Reserve from issuing a central bank digital currency, is also up for debate and a vote this week.
On July 22, Donald Trump’s Digital Asset Task Force is expected to release a report that could include an American strategic Bitcoin reserve, which could also boost crypto market sentiment.
