This week, the Digital Asset Market Clarity Act cleared a major legislative hurdle, passing out of the Senate Banking Committee and advancing toward a full Senate floor vote — which proponents hope will occur before the Memorial Day recess. One of the bill’s longstanding points of contention has been how it addresses what banking groups describe as a GENIUS Act “loophole” that allows third-party platforms — such as exchanges and brokers, rather than issuers themselves — to offer rewards on passive stablecoin holdings. The Clarity Act addresses this by drawing a regulatory distinction between passive, deposit-like rewards and activity- or transaction-based incentives (such as payments) for those parties.
However, another element of the Clarity Act has the potential to derail its path to becoming law before the midterms: its anti-money laundering (AML) provisions and the range of entities to which they apply.
The Clarity Act extends Bank Secrecy Act and sanctions obligations to a wide range of centralized digital asset intermediaries — including commodity brokers and dealers, exchanges, custodians, and certain front-end interfaces — requiring them to implement AML programs, KYC procedures, and suspicious activity reporting (SARs) on par with traditional financial institutions. These obligations apply across common money and value flows, such as bank-to-crypto, crypto-to-crypto via custodial wallets, and crypto-to-crypto transfers between self-custody and custodial wallets (and vice versa). This is broadly seen as a constructive development that will help advance the bill.
What remains unclear is exactly where the bill draws the line between “centralized” intermediaries and truly decentralized protocols — which are treated differently and are not subject to the same stringent BSA requirements, at least as currently written. It is this boundary between regulated, centralized intermediaries and exempt DeFi protocols that could stall the bill on the Senate floor.
