CLARITY Act advances in Senate after full rewrite, key wins for Bitcoin self-custody and banks

CLARITY Act’s Legislative Journey

After bipartisan approval in the House, the CLARITY Act was sent to the Senate Banking Committee. There, it remained untouched for almost a year. When the committee finally moved it forward, the bill returned with every section rewritten. The official Congressional record now shows the first 256 pages are struck through, with an entirely new Senate version beginning on page 257.

This substantial overhaul raised questions regarding how the revised CLARITY Act, after June 1, actually impacts Bitcoin. Some advocates on social media have claimed it could spark the next bull market, though these assertions remain debated within the crypto community.

Self-Custody and Developer Protections

Section 605 of the Senate’s draft, titled “Keep Your Coins Act,” makes self-custody of digital assets a legally protected right. This provision prevents federal regulators from restricting individuals’ lawful ability to hold their own digital assets without third-party intermediaries. Previously, no explicit statutory safeguard existed for this practice.

This move follows concerns stemming from 2020, when then-Treasury Secretary Steven Mnuchin instructed FinCEN to propose rules targeting “unhosted wallets.” The suggested measures would have required exchanges to gather names and home addresses for private wallet transfers over $3,000 daily, and file reports for transactions above $10,000. Although these rules stalled, they remained active and could have been revived at any time in the four years that followed. Section 605 aims to prevent such regulatory reach in the future.

Section 605 ensures that individuals can maintain full control over their digital assets without mandatory involvement by custodial intermediaries, establishing clear legal protection for self-custody within the United States.

Section 604, the Blockchain Regulatory Certainty Act, grants explicit immunity to non-custodial developers, node operators, and wallet providers from being classified as money transmitters. This change arose after legal actions against open-source, non-custodial projects like Samourai Wallet and Tornado Cash, whose developers were prosecuted under money transmission laws. Although Section 604 does not retroactively address these cases, it establishes clear boundaries moving forward.

Mini dictionary: FinCEN is the Financial Crimes Enforcement Network, an office within the U.S. Treasury that combats financial crimes, including money laundering and terrorist financing, and enforces relevant regulatory measures.

Access for Banks and Institutions

Section 401 of the CLARITY Act provides what many see as the bill’s largest benefit for Bitcoin. This section authorizes banks, brokerages, and other financial institutions to treat Bitcoin as a recognized asset class, offering custody, lending, brokerage, and market-making services without requiring new approvals beyond existing banking regulations. The term “digital asset” is defined broadly in accordance with the GENIUS Act, and covers Bitcoin without ambiguity.

The effect could be significant, as US commercial banks collectively hold assets totaling $25.7 trillion, vastly exceeding Bitcoin’s $1.3 trillion market capitalization. Large custodians such as State Street and Northern Trust each manage assets many times greater than the entire Bitcoin market, highlighting the potential for new capital inflows should institutions fully enter the space.

Limitations of the CLARITY Act

Despite these changes, the bill does not codify Bitcoin’s status as a commodity within federal law. Currently, the Commodity Futures Trading Commission (CFTC) and US courts have treated Bitcoin as a commodity, but this status is based on regulatory precedent, not explicit statute. Earlier House language that would have closed this gap was removed in the Senate’s rewrite. A July 22 draft seeks to reinstate this provision, but it remains neither law nor a formally filed amendment.

Additionally, the current Senate bill omits prior House language that would have expressly forbidden the Federal Reserve from issuing a retail Central Bank Digital Currency (CBDC). The entire section titled “Anti-CBDC Surveillance State Act” was struck from the bill and no equivalent provision remains.

Even if the CLARITY Act passes, implementation may be delayed. The Commodity Futures Trading Commission, which would take on major oversight duties, is currently challenged by staffing reductions, with only one commissioner and a 21% drop in staff over the past year. The GENIUS Act, signed the previous year, missed all initial rulemaking deadlines across six federal agencies as of mid-2026, highlighting potential delays for the new framework as well.

The CLARITY Act offers specific benefits for Bitcoin, but broader reforms are aimed at clarifying the regulatory landscape for a wide array of digital assets, not just Bitcoin.