Two competing versions of the CLARITY Act are advancing through Congress, each taking a different approach to whether U.S. banks can custody, underwrite, and trade digital assets, according to a Congressional Research Service report cited by BitMedia.

The CRS analysis frames the legislative debate around a central question: do cryptocurrency and digital asset activities constitute "banking business" under existing law? Federal regulators have repeatedly altered their approach since 2017, sometimes permitting bank involvement with crypto and other times restricting it, the report's authors write. The authors argue that only legislative action can establish stable rules and reduce the risk of frequent regulatory revisions tied to administration changes.

What risks does the CRS highlight?

The report outlines three primary concerns for financial stability. First, the pseudonymous structure of most blockchains complicates Anti-Money Laundering and Countering the Financing of Terrorism compliance. Second, sharp price swings in crypto markets could trigger losses on bank loans collateralized by digital assets. Third, deposits insured by the Federal Deposit Insurance Corporation create a moral hazard: if a bank fails after expanding into volatile crypto activities, the government effectively absorbs part of the loss.

The CRS authors note that crypto itself is unlikely to pose a systemic risk in isolation. If banks become large participants in crypto markets, however, the financial system's overall vulnerability could rise through concentrated lending or market-making exposure.

How do the House and Senate versions differ?

The CLARITY bill approved by the House allows banks to use digital assets and blockchain technology for any activities already permitted under existing legislation. It also expands the menu of permissible crypto activities for financial holding companies and bank subsidiaries.

The version transmitted to the Senate grants banks broader powers. Banks would gain explicit authority to act as underwriters, guaranteeing placement of new token offerings, and as dealers, buying and selling digital assets on their own balance sheets to provide market liquidity.

What regulatory approaches is the CRS evaluating?

The report identifies three possible frameworks for Congress:

• Leave the question to federal agencies, as the current case-by-case model does
• Enact a statute that defines permitted crypto activities for banks
• Combine statutory guidance with ongoing agency discretion

The House version aligns most closely with the first approach. The Senate version tilts toward the second.

What related changes are already underway?

The SEC has exempted crypto platforms from registering as national securities exchanges for five years, creating a new "Tokenized Securities Venue" status. That designation permits trading of tokenized equities through automated market makers and liquidity pools without obtaining a broker-dealer or exchange license, a parallel track that operates alongside the CLARITY Act debate.

What happens next?

Both CLARITY versions must clear a House-Senate conference committee before either chamber can deliver a final bill to the president's desk. Industry participants should expect formal comment periods on any conference report, with material implications for bank custody rules, deposit insurance treatment, and capital requirements tied to digital asset holdings.