XRP is poised on the brink of being accepted as a more legitimate financial asset in multiple jurisdictions, but the stalled US CLARITY Act is impeding that acceptance. Without clear regulation, XRP and other cryptocurrencies languish in an area of investor uncertainty.
For many institutional investors, one of the biggest red flags for investing in or adopting cryptocurrency has been the regulatory scrutiny that surrounds them. While some individuals and companies are happy to risk investing in them, many others are playing the waiting game to see how valuable they will be once there are clear regulatory structures around them. One piece of legislation that is due to rectify this uncertainty in the United States is the Digital Asset Market Clarity Act, shortened to the CLARITY Act, in many cases.
This act is intended to, as the name suggests, provide much greater clarity around the regulatory reality of cryptocurrency and other digital assets. For cryptocurrency like XRP, the CLARITY Act could provide the basis for much-needed institutional investor trust and regulatory certainty that is currently lacking. While crypto supporters who track the XRP price live every day on crypto trading platforms are already assured of the coin’s value, many institutional investors and traditional finance actors are not so sure. Unfortunately for XRP and other coins, the CLARITY Act looks to be stalling out, with its future progress becoming less certain.
Let’s take a closer look at what exactly the CLARITY Act is, why it’s stalled and why it could be important for coins like XRP.
What Exactly Is the CLARITY Act?
The CLARITY Act is a piece of legislation in the U.S. that is intended to provide a more concrete and comprehensive federal framework for digital assets like cryptocurrencies. One of the main components of the act is to make it clear exactly which regulatory body is responsible for different types of digital asset activities. The act is heralded as the legislation that will dispel uncertainty in the U.S. about how cryptocurrencies should be treated.
By providing a more concrete set of legislation setting out how different digital assets should be treated, the act would make it clear what sort of regulatory requirements businesses in the cryptocurrency industry must abide by. The legislation would, theoretically, create a much more predictable and certain environment for investment in cryptocurrencies in the U.S.
Why Has the Act Stalled?
The Act definitely has the potential to continue on the way towards becoming a law, but has, at present, yet to proceed any further. The CLARITY Act did have a signing target of July 4th, which it has missed. There are significant doubts as to whether the Act will be considered again before the summer recess on August 7th.
Among the factors that have slowed the progress of the Act are the following:
Different Priorities For Congress
While the CLARITY Act is a big deal for cryptocurrency holders, institutional investors and businesses eager to engage in a more structured and regulatory-secure cryptocurrency industry, it is not as big of a deal for many members of Congress. Especially when weighed against things like tax policies, defense, government funding and healthcare.
The CLARITY Act will remain an important area of policy advancement, but it is by no means the only important area that Congress must consider.
How to Regulate Cryptocurrency Is By No Means Unanimous
There is continuing debate among lawmakers as to how exactly cryptocurrency should be regulated. Some lawmakers are in favor of lighter regulation that allows greater innovation, and others are more interested in ensuring that consumer protections are upheld and oversight is increased. Without bringing these disparate views to a more agreeable middle ground, the Act might continue to take more time to be enshrined into law.
The Regulatory Responsibility is Also Under Question
Considering that one of the most important things that the CLARITY Act intends to solve is which agency will be responsible for cryptocurrencies, some consensus on that matter is a necessity for the Act to be completed. At present, there is still debate about how different cryptocurrencies should be treated, and which federal body should oversee them.
The Importance of Regulatory Clarity for XRP
If you know your cryptocurrency history, you’ll know that there has already been a legal dispute between the Securities and Exchange Commission (SEC) and Ripple Labs about how XRP should be treated. While that legal dispute has been mutually dismissed, it was still a clear sign that cryptocurrencies like XRP are woefully overdue for regulatory certainty.
The passing of an act like the CLARITY Act would allow XRP to be invested in and adopted by institutional finance investors and businesses without any fears that there was a Damoclesian regulatory ruling hanging over their heads. Consistent rules and regulations at the federal level are exactly what coins like XRP need to solidify confidence in them, and proponents of both the CLARITY Act and those coins expect such changes to help push their value up.
