Trump Is Pushing for the CLARITY Act by Spring 2026. Here Is What the Law Would Actually Do.

President Trump urged Congress in March 2026 to pass the CLARITY Act without delay, and Treasury Secretary Scott Bessent signalled a spring 2026 signing target. The CLARITY Act is the most significant piece of US digital asset legislation since the GENIUS Act addressed stablecoins. It covers market structure: which agency regulates which assets, how exchanges and brokers register, what legal protections decentralised finance protocols receive, and whether the Federal Reserve can issue a central bank digital currency without Congressional authorisation. If signed as currently drafted, the CLARITY Act would resolve most of the regulatory uncertainty that has kept large segments of US institutional capital cautious about digital asset exposure since 2022.

Key Highlights

• President Trump urged Congress to pass the CLARITY Act without delay in March 2026, with Treasury Secretary Bessent signalling a spring signing target
• The Act classifies Bitcoin and Ethereum as digital commodities under CFTC jurisdiction, removing them from SEC oversight
• DeFi protocols meeting specified decentralisation criteria receive a conditional safe harbor from securities law compliance
• The Act bans the Federal Reserve from issuing a central bank digital currency without explicit Congressional authorisation
• New registration categories are created for digital asset exchanges, brokers, and custody providers
• California’s DFPI released formal rulemaking proposals in April 2026 with a July 1, 2026 compliance deadline, adding state-level momentum to the federal push

The Core Commodity Classification

The most consequential single provision in the CLARITY Act is the classification of Bitcoin and Ethereum as digital commodities under the jurisdiction of the Commodity Futures Trading Commission. This is not a novel legal argument. The CFTC has asserted jurisdiction over Bitcoin futures since 2017, and multiple courts have ruled that Bitcoin is a commodity rather than a security. What the CLARITY Act does is codify that classification in statute, removing the legal ambiguity that has allowed the SEC to assert jurisdiction over any digital asset it chose to target.

For Bitcoin, the practical change is limited because Bitcoin’s regulatory status has been relatively clear for years. For Ethereum, the commodity classification is more significant. The SEC under Gary Gensler treated Ethereum’s proof-of-stake transition as potentially converting it into a security, given the yield-generating staking mechanism. The CLARITY Act forecloses that argument by statute. Under the law, Ethereum would be regulated by the CFTC, which applies disclosure and market integrity rules designed for commodity markets rather than the investor protection framework of securities law. The Ethereum Foundation’s decision to stake 70,000 ETH becomes significantly less legally complex if Ethereum’s commodity classification is settled in federal statute. The institutional migration of repo markets to Ethereum also proceeds with clearer legal footing under CFTC oversight than under the ambiguity of concurrent SEC and CFTC jurisdiction.

The DeFi Safe Harbor

The CLARITY Act’s DeFi safe harbor provision is the most debated section of the bill. Under the safe harbor, decentralised finance protocols that meet a set of criteria related to decentralisation, governance, and operational characteristics would be exempt from securities broker-dealer registration requirements. The criteria include having no centralised operator with the unilateral ability to halt protocol operations, having governance controlled by a distributed set of token holders rather than a founding team, and having smart contract code that is publicly auditable and verified.

The safe harbor is conditional: a protocol can lose safe harbor protection if it later introduces centralised control mechanisms, if founding-team token holdings become concentrated above a specified threshold, or if regulatory investigators find that the protocol was designed to circumvent the safe harbor criteria while maintaining effective centralised control. The DeFi industry has broadly welcomed the safe harbor concept while raising concerns about the specific criteria, which some protocols argue are difficult to meet without fundamentally changing their governance structures. April’s DeFi security crisis, which produced $577 million in losses, has added complexity to the safe harbor debate: regulators are more hesitant to provide blanket legal protection for protocols that have demonstrated vulnerability to state actor attacks.

The CBDC Ban

The CLARITY Act’s prohibition on Federal Reserve issuance of a central bank digital currency without explicit Congressional authorisation is the provision with the most direct political motivation. The Trump administration has been consistently opposed to a retail CBDC, viewing it as a surveillance tool that would give the government visibility into every American’s financial transactions. The prohibition in the CLARITY Act formalises that opposition in statute, requiring any future CBDC programme to clear the full legislative process rather than being initiated administratively by the Federal Reserve.

This provision has drawn direct attention at Kevin Warsh’s confirmation hearing on April 21, 2026. Warsh has indicated support for the principle that a retail CBDC should require Congressional authorisation, which aligns with the CLARITY Act’s approach. The combination of a CLARITY Act CBDC prohibition and a Federal Reserve Chair who holds personal positions in decentralised protocols creates a regulatory environment that is fundamentally different from the one that existed under Jerome Powell. Warsh’s confirmation hearing is the political context in which the CLARITY Act’s final passage is being evaluated by the Senate Banking Committee.

California Moves Ahead at the State Level

While the CLARITY Act moves through Congress at the federal level, California’s Department of Financial Protection and Innovation released formal rulemaking proposals in April 2026 outlining registration procedures, disclosure requirements, and surety bond standards for digital asset businesses ahead of a July 1, 2026 compliance deadline. California’s framework will apply to businesses operating in the state regardless of whether the federal CLARITY Act is signed before that date.

The California framework creates a compliance complexity for businesses that operate nationally: they may need to meet California’s state requirements and the federal CLARITY Act requirements simultaneously, with potential conflicts between the two regulatory regimes. The CLARITY Act contains a preemption provision that would override conflicting state regulations once federal standards are in effect, but the preemption applies prospectively rather than retroactively. The GENIUS Act’s stablecoin framework, which reached a bipartisan deal in April, is the legislative model the CLARITY Act’s sponsors are hoping to replicate in terms of building sufficient Senate support for passage. Institutional Bitcoin inflows accelerating through April suggest that the market is already pricing in a higher probability of the CLARITY Act passage than was reflected in prices three months ago.

The TCB View

The CLARITY Act would do more to normalise institutional participation in digital asset markets than any single piece of legislation in US history. The combination of commodity classification for Bitcoin and Ethereum, a conditional safe harbor for DeFi protocols, and a legislative CBDC prohibition addresses the three most significant sources of regulatory uncertainty that have kept large institutional allocators cautious about full commitment to the space. The spring timeline is ambitious. Congress has missed its own crypto regulatory deadlines before, and the DeFi security crisis in April has given some members additional reasons to slow down rather than accelerate. But the political will is present in a way it has not been since the crypto regulatory debate began. If Warsh is confirmed and the CLARITY Act is signed in the same quarter, the structural case for institutional digital asset exposure becomes significantly more compelling than it has been at any point in the market’s history.