How the CLARITY and GENIUS Acts Are Reshaping America's AI-Crypto Future

The United States is experiencing a dramatic regulatory transformation in cryptocurrency and AI policy. The advancement of the CLARITY and GENIUS Acts in the U.S. Congress, combined with the Federal Housing Finance Agency's groundbreaking decision on crypto-backed mortgages, marks a pivotal shift from years of regulatory hostility to clear, innovation-friendly frameworks.

Although cryptocurrency operates globally, national regulations significantly impact innovation and adoption within each jurisdiction. Regulations influence everything from the pace of progress to the degree of penalties that users face, ultimately dictating how and where these technologies can be safely utilized. These new policies are repositioning the United States at the forefront of crypto and AI innovation, opening clearly defined legal pathways for developing the next generation of American-led crypto and AI projects.

This article will examine the regulatory journey from the problematic enforcement era through today's legislative agenda, exploring how the CLARITY Act, GENIUS Act, and FHFA decision may work together to create a comprehensive framework for crypto adoption. We will conclude with forecasts of what this regulatory transformation means for the future of crypto innovation, both domestically and globally.

From Innovation to Enforcement: A Decade of Regulatory Evolution

The Unregulated Era (2009-2020)

For cryptocurrency's first decade, the industry operated in a largely unregulated market with limited oversight from governments and institutions. Not yet considered serious by regulators, the industry quickly established a foothold and became a vibrant hypergrowth sector driving financial and technological innovation.

Cryptocurrency adoption surged dramatically during this period. What began with just 1% of Americans owning crypto in 2015 grew to 6% by 2020, representing over 15 million people. The ICO boom of 2017 and NFT mania of 2021 captured mainstream imagination, and as adoption accelerated, so did concerns about crypto potentially challenging legacy financial institutions.

By 2020, the cryptocurrency industry had scaled enough to pose potential systemic risks, forcing governments to take regulatory positions. However, determining oversight proved challenging. Multiple agencies—including the SEC, CFTC, IRS, FinCEN, OCC, and FTC—claimed jurisdiction over different aspects of the emerging industry.

The Gensler Era: Regulation by Enforcement (2021-2025)

The SEC would eventually assume primary control during the early 2020s under Gary Gensler's leadership. On April 17, 2021, Gensler was sworn in as the 33rd Chairman of the SEC. Initially, his appointment generated industry optimism. Gensler possessed strong technical knowledge of blockchain technology and often spoke about crypto's benefits.

However, this optimism proved short-lived. By August 2021, Gensler had characterized crypto as the "Wild West" and initiated what became known as "regulation by enforcement," a policy of aggressive legal action without providing clear regulatory guidelines. This approach involved applying the Howey test (a legal standard for determining what constitutes a security) broadly across the industry while refusing to clarify regulations on common industry practices like staking when requested by leading US crypto companies.

The enforcement campaign escalated rapidly. Gensler's SEC issued Wells notices (formal notifications of potential enforcement action) to major industry players. For example,  Paxos for their BUSD stablecoin backing in February 2023 and Kraken for offering staking services. The SEC sued Coinbase in June 2023, the largest US cryptocurrency exchange, for allegedly operating an unregistered exchange and classifying staking as securities.

These aggressive tactics proved controversial and often met with dissenting opinions from fellow SEC Commissioners. Coinbase CEO Brian Armstrong publicly criticized the SEC's approach, stating the agency acted hypocritically after his company attempted to become regulated but received an "icy reception" before getting sued. Armstrong warned that the SEC's approach was driving developers out of the US due to regulatory uncertainty.

The legal ramifications of Gensler's enforcement strategy began catching up by 2023. Courts started reversing SEC decisions and ruling against the agency's cases. Notable defeats included a July 2023 court ruling that XRP was not a security on public exchanges and an August 2023 appeals court decision overturning the SEC's rejection of Grayscale's Bitcoin ETF application.

By 2024, mounting judicial pushback forced the SEC to drop its investigation into Ethereum 2.0. The agency faced sanctions in the DEBT Box case for misrepresenting evidence, and eighteen states sued the SEC and Gensler for enforcement overreach. With the election of a pro-crypto administration in November 2024, Gensler announced his resignation effective January 20, 2025, leaving behind a legacy of enforcement setbacks.

Gary Gensler was not the only official during the previous administration with an anti-crypto agenda. Senator Elizabeth Warren emerged as an outspoken opponent, threatening to raise an "anti-crypto army" and attempting to pass her Digital Asset Anti-Money Laundering Act to outlaw self-custody of digital assets.

A New Dawn: The 2024 Political Transformation

This legacy of regulatory uncertainty and departmental overreach set the stage for comprehensive reform. The 2024 US presidential election became the first to place cryptocurrency firmly in the spotlight. Crypto adoption had reached 12% of Americans by 2024, approximately 31.55 million people, making it impossible for politicians to ignore.

While the Democratic party initially followed Senator Warren's anti-crypto initiatives, the Republican party under President Trump fully embraced the industry. Trump's keynote speech at the annual Bitcoin Conference in Las Vegas during his campaign symbolized this dramatic shift in political positioning.

The CLARITY and GENIUS Acts represent the first major legislation within this new political environment, designed to replace the failed enforcement approach with clear and comprehensive regulatory frameworks.

The CLARITY Act: Establishing Jurisdictional Framework

The CLARITY Act establishes a comprehensive regulatory framework for digital asset oversight. Rather than continuing turf wars between agencies, the act clearly divides oversight primarily between the SEC and CFTC, granting exclusive authority to the CFTC over digital commodities based on how cryptocurrencies are utilized rather than their underlying mechanics.

The CLARITY Act addresses several key areas:

Provisional Registration: Digital commodity exchanges, brokers, and dealers must register provisionally with the CFTC within 180 days of enactment, with specific requirements for disclosures and recordkeeping.

Consumer Protections: The act includes comprehensive rules for asset custody, fraud prevention, and restrictions on using customer assets for blockchain activities like staking without explicit consent.

DeFi and Stablecoins: Certain decentralized finance (DeFi) activities receive exemptions from registration requirements, while the framework provides clear guidelines for stablecoin trading.

Agency Coordination: The SEC and CFTC must issue joint rules within 360 days of enactment to further define terms and regulations, preventing future jurisdictional conflicts.

As its name suggests, the CLARITY Act provides the cryptocurrency industry with clear jurisdictional frameworks for legal operation within the US. The act improves consumer confidence by ensuring crypto companies face consistent regulation and provides certainty for AI developers building complex algorithmic trading systems and automated asset management platforms.

At the time of writing, the bill has passed both the House Financial Services and Agriculture committees with bipartisan support and awaits a full House vote.

The GENIUS Act: Stablecoin Infrastructure

Building on the foundation established by the CLARITY Act, the GENIUS Act provides a comprehensive regulatory framework specifically for stablecoin payments. While the CLARITY Act establishes overall regulatory structure and jurisdictional boundaries, the GENIUS Act focuses on the payment infrastructure that enables AI-crypto applications.

Stablecoins represent fundamental pillars of decentralized finance (DeFi) infrastructure. They enable seamless movement of money into stable assets pegged to the US dollar and allow near-instant settlement of global transactions. Unlike other digital assets, stablecoins are exempt from CFTC and SEC oversight as outlined in the CLARITY Act, being classified as neither securities nor commodities.

The GENIUS Act provides regulatory clarity through specific requirements:

Reserve Requirements: Issuers must maintain 1:1 reserves of liquid assets, ensuring each stablecoin is fully backed by equivalent value.

Regulatory Oversight: Issuers with over $10 billion market capitalization face federal oversight by the Federal Reserve, Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation (FDIC), and/or National Credit Union Administration (NCUA).

Consumer Protections: Stablecoin holders receive priority claims in issuer bankruptcy proceedings, ensuring redemption before other creditors. Issuers must publish monthly reserve compositions and undergo regular audits for transparency.

Anti-Money Laundering Compliance: Issuers are treated as financial institutions under the Bank Secrecy Act, requiring robust anti-money laundering (AML) protocols, customer identification procedures (Know Your Customer/KYC), and suspicious transaction reporting.

Operational Restrictions: Issuers cannot pay interest or yield on stablecoins, maintaining their function as stable value transfer mechanisms. Foreign issuers must comply with US regulations or face restrictions.

Custodial Services: Insured depository institutions can provide custodial services for stablecoins without treating them as balance-sheet liabilities, facilitating traditional bank integration.

By establishing clear regulations for US-regulated stablecoins, the GENIUS Act supports the development of crypto-native AI agents that rely on seamless payment infrastructure for autonomous transactions.

At the time of writing, the GENIUS Act has passed the Senate with a bipartisan vote of 68-30 and awaits a House floor vote.

FHFA Decision: Expanding Financial Integration

The third pillar of America's cryptocurrency regulatory advancement emerged on June 25, 2025, when the Federal Housing Finance Agency issued a directive ordering Fannie Mae and Freddie Mac to formally consider cryptocurrency as an asset in single-family mortgage loan risk assessments.

While this decision lacks the same legal standing as the pending formal legislative passage of the GENIUS or CLARITY Acts, its ramifications are equally impactful. The FHFA decision orders government-sponsored enterprises (GSEs) that support federal mortgage programs to accept cryptocurrencies as collateral when evaluating mortgage applications.

This directive demonstrates governmental departments' commitment to executing the administrative mandate for comprehensive crypto regulation. It opens homeownership opportunities to the forty million Americans who currently hold cryptocurrency, primarily younger generations who have faced traditional barriers from holding non-traditional asset holdings.

The decision represents more than policy change—it signals mainstream financial system acceptance of cryptocurrency as legitimate wealth storage, further validating the industry's transition from experimental technology to recognized financial infrastructure.

The Future of American Crypto Leadership

These three regulatory developments collectively represent a major transformation in America's approach to cryptocurrency and AI innovation.  With the development of comprehensive legislative frameworks, the U.S. is reestablishing itself as a global leader in crypto.

The regulatory progress creates a technological moat for American innovation by providing clear legal frameworks spanning from trading platforms to mortgage lending. These landmark advancements enable American companies to build the next generation of autonomous financial systems, algorithmic trading platforms, and AI-powered blockchain infrastructure, positioning the United States as the global hub for AI-crypto innovation.

Several factors make this transformation particularly significant:

Legislative Durability: By creating frameworks through the legislative process rather than executive orders, these regulations become more difficult to reverse. While reversal remains possible, it would require new legislation, and current bipartisan support suggests stability in the short term.

Institutional Adoption: Clear regulations enable broader institutional adoption beyond ETF approvals, providing multiple avenues for traditional financial institutions to engage with cryptocurrency markets safely.

International Competitiveness: As other nations struggle with regulatory uncertainty, American clarity attracts international talent and capital, creating competitive advantages in emerging technologies.

Innovation Acceleration: Regulatory certainty allows developers to build complex systems without legal uncertainty, accelerating sophisticated AI-crypto applications previously hindered by compliance concerns.

Consumer Protection: Comprehensive frameworks protect consumers while enabling innovation, building the public trust necessary for mainstream adoption.

Cryptocurrency and AI development flow toward jurisdictions where they are respected and supported. The cryptocurrency industry never wanted to operate in unregulated markets, as such environments hamper broader adoption and limit institutional access. Clear, comprehensive regulation enables innovation while protecting consumers, providing legitimate alternatives to archaic banking infrastructure.

American regulatory clarity in cryptocurrency and AI represents more than policy change: it signals the country's commitment to leading the next phase of financial and technological innovation. By replacing enforcement-based approaches with comprehensive legal frameworks, the United States positions itself to capture the enormous economic and strategic advantages of AI-crypto convergence while maintaining consumer protection and financial stability.