Banks Need CLARITY Act More Than Crypto – Former CFTC Chair Explains Why

US banks may need regulatory clarity more than the crypto industry, a former Commodity Futures Trading Commission (CFTC) chief said, arguing they risk falling behind the rest of the world.

On Sunday, Chris Giancarlo, former chairman of the CFTC, discussed the significant policy reversal under the Trump administration that has been driving crypto innovation in the US, including the highly anticipated market structure bill.

In an interview for Scott Melker’s The Wolf Of All Streets podcast, the ex-CFTC chief affirmed that landmark stablecoin legislation enacted last July, the GENIUS Act, was “the appetizer” for crypto regulation, while the market structure bill, also known as the CLARITY Act, represents the main dish but has become the “hard part.”

Giancarlo affirmed that banks need regulatory clarity more than the crypto industry, arguing that they will be hesitant to invest in new technology without clear rules, and their systems will be superseded.

The banks, however, can’t afford regulatory uncertainty. Their general counselors are telling their boards, you can’t invest billions of dollars in this (…) unless you’ve got regulatory certainty. (…) The banks need this clarity because they need to build this. They need to be in the forefront, not in the rear guard of this innovation.

On the contrary, the crypto industry will continue to build and innovate in other jurisdictions. “They are risk-takers. They’re going to build it here, or they’re going to build it abroad,” the former CFTC chairman asserted.

“They won’t have the support of legislation that makes it work forever or at least into the next presidential cycle, but it’ll make it work for now. Now, does that give the industry the certainty they want? No. And who needs that certainty more than the banks? Crypto doesn’t need it. They were building even under the whip hand of Gary Gensler,” he added.

Giancarlo emphasized that the digital assets legislation has become a political issue, with Republicans opposing Democrats, and traditional finance (TradFi) opposing decentralized finance (DeFi) and new technologies.

The ex-CFTC chief also noted that the challenges of the regulatory timing, asserting that “If we could not be in a worse time, we’re in an election year.” During this period, politicians’ focus is on the upcoming mid-term elections, he detailed, and “everything that takes place in Washington (…) is all about swaying the voters for the elections.”

He also warned that the chances of reaching a deal could crumble if Democrats gain control of the House of Representatives in November, given the Biden administration’s stringent regulations on the industry.

“I think there’s a recognition that this is the new architecture of finance and America, our financial institutions are the world’s dominant financial institutions. We need to modernize that. We need to adopt this technology,” he concluded.