CLARITY Bill Takes the Decentralization out of Crypto — Crypto Exec

The regulatory provisions outlined in the US Digital Asset Market Structure Clarity Act, otherwise known as the CLARITY Act, threaten to give large financial institutions control over crypto, according to Dr. Friederike Ernst, co-founder of the Gnosis blockchain protocol.

Regulations in the CLARITY crypto market structure bill assume that activity must pass through centralized intermediaries, which risks consolidating crypto rails in the hands of a few entrenched players, Ernst told Cointelegraph.

“Blockchain’s real breakthrough was not just a new financial infrastructure. It was the ability for users themselves to become owners of the networks they rely on,” she said. Ernst added:

“If activity is pushed back through institutional intermediaries, users risk becoming customers renting access to financial technology once again rather than stakeholders in it. The challenge is ensuring regulatory clarity does not unintentionally undermine that ownership model.”

Despite the bill’s shortcomings, the CLARITY Act does clarify regulatory jurisdiction over crypto between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), as well as protects peer-to-peer transactions and self-custody, Ernst said.

However, the failure of the market structure bill to adequately protect open, permissionless blockchain rails and decentralized finance protocols risks bringing all the same points of failure of the legacy financial system to crypto, Ernst said.