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The DeFi exemptions in the Digital Asset Market Clarity Act of 2025 (the CLARITY Act, H.R. 3633, passed by the House in July 2025) are a key feature designed to protect truly decentralized activities from heavy registration and oversight requirements. The goal is to avoid treating open-source developers, node operators, or basic protocol maintainers as if they were centralized exchanges or brokers—something that has been a major pain point in the crypto space under existing SEC and CFTC enforcement approaches.
These exemptions appear in two parallel sections:
Section 309 — Exclusion for decentralized finance activities (applies to SEC jurisdiction).
Section 409 — Exclusion for decentralized finance activities (applies to CFTC jurisdiction, especially for digital commodities).
What Activities Are Exempted?
The bill explicitly states that a person is not subject to the Act's registration, licensing, or other core regulatory requirements (nor treated as a broker, dealer, exchange, or intermediary) solely because they engage in certain activities related to the operation, maintenance, or development of blockchain networks or DeFi protocols. The exempted activities include:
Compiling, validating, searching, sequencing, or otherwise processing network transactions (e.g., running a validator node, mining/staking to secure the chain, or relaying blocks).
Providing computational work, bandwidth, or other incidental services to support the blockchain (like operating nodes, providing oracle data, or contributing storage/processing power).
Providing user interfaces that allow users to access or interact with a blockchain system (e.g., front-end wallets, explorers, or dApp interfaces that don't custody funds or execute trades on behalf of users).
Publishing, updating, maintaining, or developing software for blockchain networks (including open-source code releases, protocol upgrades, or smart contract libraries).
Developing wallets or software that enables users to self-custody their own digital assets.
Operating or participating in liquidity pools for spot trades on decentralized protocols (in some interpretations of the bill language, as long as no centralized control is exercised).
Developing or maintaining decentralized finance trading protocols or messaging systems (e.g., building AMMs, lending protocols, or DEX smart contracts without taking custody or discretionary control).
In short: If you're just building code, running infrastructure, or providing tools that let users interact directly with the blockchain (peer-to-peer, no middleman), you're generally carved out from being forced to register as a regulated entity under this framework.
Important Limitations and What Isn't Exempted
These exemptions are narrow and do not create a free-for-all:
They apply only to the specific activities listed — not to the broader operations of a protocol.
They do not shield anyone from anti-fraud, anti-manipulation, or false-reporting rules. Both the SEC and CFTC retain full enforcement authority here. If a DeFi project involves scams, pump-and-dumps, wash trading, or misleading claims, regulators can still go after it aggressively.
If someone crosses into intermediary-like behavior, the exemption doesn't apply. Examples include:
Taking custody of user funds.
Acting as a counterparty to trades.
Exercising control over user orders or protocol parameters for profit.
Running a centralized front-end that effectively intermediates transactions.
In those cases, the person or entity would likely need to register as a digital commodity exchange, broker, dealer, etc. (under CFTC for spot markets) or face SEC rules if securities-like elements are involved.
The exemptions are tied to truly decentralized setups — things like "decentralized governance systems" (where no single person or group has unilateral control) get favorable treatment elsewhere in the bill, but weak or gamed "decentralization" could still trigger scrutiny.
Why These Exemptions Matter
Pro-innovation view: They protect open-source developers and node runners from being regulated out of existence. Without this, many argue DeFi couldn't thrive in the U.S., as building code could accidentally make you a "broker."
Critic view (from consumer groups and some regulators): The carve-outs are too broad, potentially leaving gaps in oversight for risky DeFi practices (e.g., flash loan exploits, impermanent loss scams, or illicit finance facilitation). Some say it gives DeFi a "get-out-of-jail-free card" compared to traditional finance.
Current Context (as of January 20, 2026)
The House-passed version includes these exemptions as described. In the Senate (where the bill is stalled/delays in Banking/Agriculture Committees), some drafts have tweaked or bracketed DeFi language—e.g., seeking more feedback, adding AML/BSA compliance paths for protocols, or clarifying front-end responsibilities—but the core exclusions from registration for pure infrastructure/dev activities remain a central part of the ongoing negotiations.
Overall, these DeFi exemptions represent one of the bill's biggest "wins" for the decentralized side of crypto, aiming to draw a bright line between neutral code/infrastructure and actual intermediation. If the final law looks similar, it could significantly boost U.S.-based DeFi development while still keeping fraud/manipulation enforcement tools intact.

The Clarity Act, officially titled the Digital Asset Market Clarity Act of 2025 (H.R. 3633 in the 119th Congress), is a major bipartisan U.S. legislative effort to create the first comprehensive federal regulatory framework specifically for digital assets (primarily cryptocurrencies and tokens, excluding stablecoins which were addressed in the separate GENIUS Act of 2025).
Introduced on May 29, 2025, by House Financial Services Committee Chairman French Hill (R-AR) and co-sponsored by a mix of Republicans and Democrats, the bill passed the U.S. House of Representatives on July 17, 2025, with strong bipartisan support (a 294-134 vote). It was then sent to the Senate, where it has been under consideration but faced delays and revisions.
Core Purpose and Why It Matters
For years, the U.S. crypto industry has operated in regulatory uncertainty due to overlapping (and sometimes conflicting) authority between the Securities and Exchange Commission (SEC) — which treats many tokens as securities — and the Commodity Futures Trading Commission (CFTC) — which views assets like Bitcoin as commodities. This has led to enforcement actions rather than clear rules, creating a "regulation-by-enforcement" environment that many in the industry criticize.
The Clarity Act aims to end this gray zone by:
Clearly dividing jurisdiction between the SEC and CFTC.
Providing registration pathways and rules for crypto intermediaries (exchanges, brokers, dealers).
Closing the "spot market gap" where non-security digital asset spot trading lacked dedicated oversight.
Balancing innovation, investor protection, and U.S. competitiveness in digital finance.
It also includes provisions related to anti-CBDC measures (prohibiting the Federal Reserve from issuing or using central bank digital currency for certain purposes without congressional approval) and affirms individuals' rights to self-custody their digital assets.
Key Provisions
Definitions and Classification
Introduces "digital commodity" as a new category: a digital asset whose value derives from a blockchain network (e.g., Bitcoin, Ethereum post-decentralization).
Excludes securities, derivatives, stablecoins, tokenized real-world assets, or NFTs/collectibles.
"Mature blockchain systems" (sufficiently decentralized) qualify digital commodities for lighter treatment.
Jurisdictional Split
CFTC gets exclusive jurisdiction over spot (cash) markets for digital commodities, including registration and oversight of:
Digital commodity exchanges (DCEs)
Digital commodity brokers (DCBs)
Digital commodity dealers (DCDs)
SEC retains authority over primary market offerings (e.g., initial sales as investment contracts) and certain activities on SEC-registered platforms (like broker-dealers or national securities exchanges).
Dual registration is allowed for some entities, with rules to avoid duplicative burdens and require conflict-of-interest policies.
Capital Raising and Secondary Markets
Creates tailored SEC exemptions for projects raising funds via digital commodities (with disclosures based on blockchain maturity).
Secondary trading of digital commodities (even if initially sold as investment contracts) is generally not treated as securities sales, allowing freer trading on compliant platforms.
Intermediary Requirements
Registration, customer asset segregation, qualified custodians, AML/KYC under the Bank Secrecy Act, disclosures, chief compliance officers, and anti-fraud/manipulation rules.
Provisional/expedited registration during implementation.
Banks can engage more directly (e.g., custody, trading) without certain balance sheet penalties.
Other Elements
Exempts certain DeFi activities and non-controlling blockchain developers.
Federal preemption over some state securities laws for digital commodities.
Joint SEC-CFTC rulemakings on mixed transactions and other details.
Current Status (as of January 20, 2026)
The bill passed the House in July 2025 and was received in the Senate in September 2025, referred to the Senate Banking, Housing, and Urban Affairs Committee.
Senate versions/builds (e.g., discussion drafts from Banking and Agriculture Committees) have incorporated elements but introduced changes (e.g., on DeFi carve-outs, token definitions, stablecoin overlaps).
A key Senate Banking Committee markup session scheduled for mid-January 2026 was postponed amid industry pushback (including from major players like Coinbase, who withdrew support over certain provisions seen as too restrictive or favoring SEC authority). No new date has been set, creating short-term uncertainty.
Progress could resume with amendments or reconciliation, but delays risk stalling before the 2026 midterms or requiring carryover to the next Congress.
If enacted, the Clarity Act would mark a shift from enforcement-heavy regulation to a structured, innovation-friendly framework — potentially boosting institutional adoption while enhancing protections. For now, it remains one of the most watched pieces of crypto legislation, with its fate hinging on Senate negotiations in the coming weeks/months.

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