The fundamental philosophical issues of CLARITY method and regulatory design

U.S. digital asset regulation faces more profound philosophical issues than mere legislative delays. It concerns how to reconcile fundamentally conflicting values: innovation versus stability, predictability versus flexibility, market freedom versus consumer protection. Before questioning the timing of the CLARITY Act, it is essential to understand the core philosophical dilemma confronting the United States.

Two Fundamental Conflicting Axes the U.S. Must Truly Resolve

The CLARITY Act (Digital Asset Market Clarification Act), considered since 2025, is not just a technical bill organizing regulatory authority. Its background involves a philosophical question that challenges the very foundation of the U.S. financial system.

The first challenge is the time gap between “regulatory clarity” and “rapid technological advancement.” Legislators need to design a framework that can adapt faster than technological innovation. However, if this framework is too flexible, both companies and regulators risk facing ambiguity again. Conversely, if it is too rigid, innovative financial technologies may flow out of the U.S., ceding market share to Singapore, Switzerland, and other leading countries.

The second challenge is how to coexist the “stability of traditional finance” with “innovation in digital assets.” The conventional banking system has maintained stability through regulation, while the digital asset industry has driven innovation by surpassing those constraints. Their core values are fundamentally at odds.

What the Stablecoin Interest Function Issue Reveals

The debate over whether stablecoins can offer interest or rewards reflects a pivotal philosophical divergence in U.S. financial thinking, rather than just technical details.

Traditional banks argue that interest-bearing stablecoins could siphon deposits from the banking system and threaten financial stability. Their perspective is rooted in the post-war principle of maintaining stability through regulation and constraints, a core tenet of U.S. financial policy.

On the other hand, digital asset companies counter that functional restrictions hinder innovation and that the U.S. risks losing its competitive edge in financial technology. Their view is based on a philosophy of “market-driven natural adjustment and efficiency.”

This conflict is not merely a technical issue amenable to compromise but pertains to the fundamental design philosophy of the financial system. Negotiations will require long-term adjustments rather than quick resolutions.

The Philosophical Contradiction in Setting Regulatory Boundaries

The attempt by the CLARITY Act to clarify the boundaries of regulatory authority also exposes another philosophical issue.

The multiple U.S. regulators (SEC, CFTC, OCC, etc.) have adopted different approaches, reflecting a philosophy of a pluralistic regulatory system that leaves room for judgment based on different values.

However, this multiplicity creates ambiguity for companies. If boundaries are drawn too clearly, regulators may lose the adaptive authority needed to respond to new financial risks, increasing market vulnerabilities.

In essence, “complete clarity” and “regulatory adaptability” are mutually exclusive. Lawmakers must make a decision somewhere along this spectrum, balancing these conflicting principles. This is not just a technical wording issue but a choice reflecting the U.S. financial philosophy.

Political Realism Versus Institutional Design

The U.S. legislative process is constrained by election cycles, which influence the passage of the CLARITY Act beyond pure institutional design.

If consensus is not reached before the current congressional window closes, re-evaluation will be necessary in the new Congress. This is not merely a delay but a reorganization of political interests. In the new Congress, negotiations may restart from scratch amid different committee compositions and priorities.

The increased involvement of the U.S. Treasury indicates that regulatory clarity is a strategic priority for economic policy. Yet, political realities can still override ideal institutional design.

International Competitive Pressures and Another Critical Issue

While the U.S. delays enacting the CLARITY Act, Europe (via MiCA), Singapore, Switzerland, and others have moved more swiftly to establish regulatory frameworks. This international competition is not just about choosing where to start a business but about whether the U.S. can maintain its position as a global leader in financial technology.

There is a philosophical dimension here: Will the U.S. prioritize its traditional focus on financial safety or embrace market openness and innovation? Different philosophical choices by regulators and industry in these regions risk diminishing the U.S.'s international competitiveness.

Path to Passage: Limits and Possibilities of Compromise

For the CLARITY Act to pass, stakeholders must reach some resolution on the above philosophical conflicts, not just technical wording.

Regarding stablecoins’ interest functions, a limited approval could be acceptable to both sides. For regulatory authority, phased delegation aligned with the growth stage of digital assets might be considered. However, these are only partial resolutions of the fundamental philosophical issues.

A complete solution is unlikely; instead, establishing a long-term coexistence framework is a more realistic approach.

Why the Timing of This Decision Matters

The enactment of the CLARITY Act is not merely about regulatory tidying but a declaration of how the U.S. defines its “financial philosophy in the digital asset era.”

It will provide market participants with predictability, attract capital, and promote compliance. Simultaneously, it grants regulators adaptive powers to respond to new risks, maintaining flexibility. It also signals the U.S.'s strategic intent to remain competitive globally in financial technology.

Delaying this decision could limit U.S. options and entrench the international landscape of financial technology outside its borders.

The Future of Regulatory Philosophy and the Timing of the CLARITY Act

Predicting the exact timing of the CLARITY Act’s passage is difficult due to the fluidity of U.S. politics, stakeholder negotiations, and international pressures.

However, the real issue is not “when” but “how” the U.S. confronts these philosophical conflicts. As long as stakeholders recognize the fundamental value clashes and seek pragmatic compromises, delays may persist. Conversely, sharing the understanding that “there is no perfect answer” could open pathways for partial agreements and phased implementation.

By 2026 and beyond, the U.S. will be compelled to make this critical decision.