a16z Crypto Policy Head Miles Jennings: Calls on Senate to Advance the CLARITY Act
Miles Jennings, head of crypto policy at a16z, stated that nearly four years have passed since the FTX collapse, yet Congress has not established a comprehensive regulatory framework to prevent similar frauds. He urged the Senate to advance the CLARITY Act, warning that "if we don't act now, the next crisis could be even bigger."
Jennings believes that the FTX collapse was not due to complex financial innovations, but rather the misappropriation of customer assets and the lack of basic safeguards such as independent custody, asset segregation, information disclosure, and regulatory oversight. Public records show that FTX founder Sam Bankman-Fried secretly transferred billions of dollars of customer funds to the affiliated market maker Alameda Research through a hidden "backdoor credit line," ultimately leading to a bank run and bankruptcy in November 2022, with Bankman-Fried later convicted of fraud.
Jennings stated that the CLARITY Act would formally bring digital asset brokers, dealers, and exchanges under regulatory oversight, introducing mechanisms such as customer asset segregation, qualified custody, restrictions on conflicts of interest, mandatory disclosures, listing standards, and insider sale restrictions, which already exist in traditional financial markets. He likened this to the crypto industry's "1933 moment"—emulating the Securities Act and Securities Exchange Act established during the Great Depression to set foundational rules for public markets, replacing the previous model of "enforcement replacing regulation" with "codified legislation."
In response to criticisms labeling the CLARITY Act as a "relaxation of regulation for the crypto industry," Jennings countered that existing U.S. laws fail to clearly define the regulatory attributes of many digital assets, and this regulatory gap has provided operational space for offshore exchanges like FTX. He also addressed controversial provisions regarding stablecoin yields, stating that the latest bill text has restricted passive stablecoin yields and allows the Treasury to take further action if evidence of deposit outflows arises.
Opposition from the banking sector is also clear—six major banking groups, including the American Bankers Association and the Bank Policy Institute, oppose the stablecoin yield provisions in the bill, fearing that such "interest-like" yields could divert bank deposits and impact local credit for small businesses, mortgages, and agricultural loans. Jennings responded that regardless of whether the bill passes, crypto intermediaries will continue to pay yields to stablecoin holders under the current GENIUS Act framework, and banks' resistance "will not punish anyone for maintaining the status quo," but cannot truly stop this trend.
Jennings emphasized that the current supply of stablecoins has exceeded $300 billion, and the scale of tokenized assets has surpassed $30 billion, with major financial institutions like BlackRock, Fidelity, Franklin Templeton, and Goldman Sachs already entering the digital asset space (e.g., BlackRock's tokenized money market fund BUIDL). He believes that the digital asset market is no longer a fringe market in the financial system, and the U.S. needs to establish long-term stable rules through legislation rather than relying on administrative policies that change with government transitions. The Senate will vote on whether to initiate deliberations on the CLARITY Act on September 15.
Source: Public Information
ABAB AI Insight
The collapse of FTX is the most representative case of regulatory failure in the crypto industry to date—In November 2022, founder Sam Bankman-Fried was revealed to have transferred billions of dollars of customer assets to his controlled market maker Alameda Research through secret credit channels, exposing the complete lack of basic compliance measures such as customer asset segregation and independent custody at the exchange, ultimately resulting in his conviction for fraud; a16z, as one of the largest venture capital firms in the crypto industry, has previously lobbied for federal-level regulatory legislation, and Jennings' statement at the four-year mark of FTX is a continuation of this lobbying effort.
As a venture capital firm deeply invested in the crypto industry, a16z's push for the passage of the CLARITY Act objectively benefits its portfolio companies by providing clearer compliance pathways and lower regulatory uncertainty, thereby attracting larger capital inflows from traditional financial institutions like BlackRock, Fidelity, Franklin Templeton, and Goldman Sachs; the opposition from banking lobby groups to the bill essentially stems from concerns that stablecoin yield products will siphon off their deposit funds—behind the policy tug-of-war between the two sides lies a battle for funds between traditional bank deposits and emerging stablecoin products.
Jennings compares the CLARITY Act to a "1933 moment," referencing the Securities Act and Securities Exchange Act that established the modern securities regulatory framework after the Great Depression; such historical comparisons are common in significant financial regulatory lobbying—essentially transforming industry scandals into political capital for legislative promotion; the current crypto regulatory legislation has undergone a phased path of "first legislating in the stablecoin area (GENIUS Act), then advancing comprehensive market structure legislation (CLARITY Act)," which is similar to the historical evolution of securities market regulation that first standardized issuance disclosures and then established exchange oversight.
This is fundamentally a reconstruction of the industry chain against the backdrop of regulatory change—As the supply of stablecoins surpasses $300 billion and the scale of tokenized assets continues to expand, with leading asset management firms like BlackRock having already made substantial investments in digital assets, the crypto market, which was previously outside the codified legal framework, is being pulled into a regulatory and competitive landscape on par with traditional securities and banking systems; mechanism-wise, whoever can first establish compliant infrastructure such as customer asset segregation and qualified custody within the regulatory framework will be able to capture the funds spilling over from the traditional banking system, while the banking groups opposing the legislation are objectively delaying this fund transfer process but cannot fundamentally stop it.
ABAB News · Cognitive Law
Regulatory gaps are not freedom; they leave a crack for the next fraud.
Scandals are the industry's most expensive legislative lobbyists.
Whoever first fills the gaps in custody and segregation will catch the overflow of deposits first.