The financial system has always evolved faster than the rules governing it. The Bank Secrecy Act of 1970, designed to track large cash transactions, has been amended over the decades to address new challenges—from the Money Laundering Control Act of 1986 to the PATRIOT Act after September 11. Now, the rise of digital assets presents another test. The Digital Asset Market Clarity Act, if passed, could provide a much-needed statutory foundation for how crypto firms and banks interact, particularly around anti-money laundering (AML) obligations.
Why Banks Need Clarity in Digital Asset Relationships
Since 2013, the Financial Crimes Enforcement Network (Fincen) has relied on interpretive guidance to explain how existing BSA requirements apply to crypto firms. While this has given the industry some direction, guidance is not as durable as statutory law. The ambiguity can leave banks uncertain about the regulatory baseline when dealing with digital asset counterparties.
Investment advisors know this uncertainty well. Fincen first proposed AML rules for certain advisors in 2003, but more than two decades later, the final rule’s effective date has been pushed to 2028. When obligations depend on interpretation rather than clear statutory requirements, uncertainty can persist for years.
This creates a real problem for banks. When a compliance officer tries to assess the trustworthiness of a digital asset counterparty’s controls, the honest answer is often that they cannot. Without clear and durable rules, banks may retreat from digital asset relationships altogether rather than try to price an immeasurable risk.
What the Clarity Act Would Change
The Clarity Act would be the first law to formally bring digital commodity brokers, dealers, and exchanges under BSA obligations. It would clarify that digital asset firms must maintain AML programs, retain transaction records, monitor and report suspicious activity, and conduct rigorous customer due diligence. This gives banks a helpful baseline for counterparty diligence and gives examiners a clearer framework for reviewing third-party risk.
By codifying these responsibilities, the act would close the gap between banks and crypto firms, providing enshrined statutory requirements instead of reliance on guidance. For banks, this could open the door to more confident engagement with digital asset innovation.
Addressing DeFi and Self-Custody Challenges
The framework works best where there are identifiable, accountable intermediaries. DeFi protocols and self-custody wallets, which operate without clear intermediaries, raise different challenges. Banks will need to pay special attention here. Information sharing between banks and regulators, combined with blockchain analytics tools that trace money flows, can help banks assess and manage these risks.
The Proposed Transaction Hold: A Powerful but Complex Tool
The bill also proposes a transaction hold, allowing crypto companies and stablecoin issuers to pause suspicious transactions for up to 30 days, extendable to 180 days with a formal law enforcement request. Firms acting in good faith would receive liability protection.
This provision has not received enough attention. Crypto transactions settle in minutes, but the legal process to freeze funds can take days—by then, the money is often gone. The hold could be a game-changer in combating illicit activity.
However, it raises concerns about innocent customers whose funds might be frozen. Companies will need clear internal standards from the outset to ensure this power is used only as a last resort.
Global Gaps Remain
CLARITY is U.S. legislation, but digital asset markets are global. The act’s AML considerations may not travel seamlessly across borders. For example, the Travel Rule requires crypto companies to share identifying information about senders and receivers of funds over a certain threshold. The Financial Action Task Force (FATF) found this year that 83% of surveyed jurisdictions have legislation implementing it, but significant gaps remain in practice and enforcement. A compliant U.S. exchange could still face a foreign counterparty that cannot or will not provide required information—something CLARITY cannot fix.
What the act can do is give the United States a credible negotiating position. The GENIUS Act already provides Treasury a route to pursue reciprocal arrangements with comparable overseas stablecoin regimes. CLARITY could offer a broader domestic baseline to push for greater international alignment.
What Banks Should Do Now
The core issue is interoperability—whether rules, data, and enforcement connect across regulatory regimes and borders. Domestically, CLARITY would solve many problems, but banks in the U.S. should not wait for global consensus. FATF already publishes country-by-country reports grading crypto rule enforcement. Banks should use these to formulate counterparty risk strategies.
Additionally, the Basel Committee’s capital rules for crypto exposure will need to be relaxed if banks are to use digital assets more frequently. SIFMA and others have pushed for updates, with a revision expected later this year.
The BSA has been rewritten before, always in response to a financial system outgrowing its rules. This is one of those moments. Banks have a clear stake in supporting the Clarity Act and preparing for the regulatory shifts ahead.
