Regulate the Risk, Not the Technology: Plume’s Endorsement of the U.S. Senate Digital Asset Market Clarity Act
For years, the debate over crypto regulation has been stuck in a false binary. On one side, die-hard cypherpunks who treat every rule as an existential threat to innovation. On the other, enforcement hawks who treat every project as a fraud-in-waiting. Both sides are too focused on their own interests and fears, which is why progress has been slow.
However, if we reframe the discussion, a productive position is clear. Regulate a financial product based on its economic substance, not the technology behind it. The goal of policy should be intended to achieve intended outcomes, not to compel a particular pathway or technology to achieve those outcomes. At its core, financial regulation aims to achieve four core goals:
Customer protection: protecting customers from unfair or deceptive practices, i.e. “rug pulls” of myriad sorts.
Market integrity: ensure that markets operate fairly and efficiently, e.g., detecting and disrupting manipulation or ensuring the financial integrity of firms and products.
Promotion of capital formation or price discovery: a core goal of securities investment regulation is to bring investors seeking returns and businesses offering returns together efficiently. A similar goal is in commodity and derivatives markets where the goal is to ensure effective price discovery to help firms price and manage risks.
Combatting illicit finance: detect, disrupt, and deter illicit actors from misusing markets to commit crime, launder illicit proceeds, or violate sanctions.
Across all these goals, open finance offers an alternative that can achieve the same or better outcomes, but only if policymakers embrace responsible innovation and work with the technology and entrepreneurs developing it to craft a new regulatory architecture to drive these outcomes.
Today’s markup on the Senate Banking Committee’s Digital Asset Market Clarity Act (Clarity Act) represents a milestone toward embracing innovation to support American and, as a consequence, global financial markets’ achievement of these core regulatory goals.
Plume enthusiastically endorses the Clarity Act and encourages lawmakers to move it forward without losing sight of this foundational principle as they negotiate the final details.
No Accountability Means Less Trust
Consider the events of October 10, 2025, when crypto markets convulsed in a matter of hours. People are still arguing about what happened: manipulation, cascading liquidations, a thin order book on the wrong day.
But what we know from legacy markets is that when something like that happens in equities or futures, regulators investigate. They subpoena communications. They reconstruct order books. And the credible threat that they will do this is itself a deterrent. I worked on the May 6, 2010 flash crash investigation at the CFTC. The investigation did not just answer questions about that day but uncovered market structure concerns that led to reforms, including the SEC’s Consolidated Audit Trail.
More effective oversight and broader implementation of risk management best practices at all layers of the crypto market could have detected and disrupted and ultimately deterred the October 10, 2025 event.
This is the undertold truth about regulation. While it does introduce new costs, those costs confer benefits and confidence across the entire system. Honest market participants pay a real cost when manipulators face no consequences, because the order book they are trading into is poisoned. A market that is not trusted is a market that nobody scales into. That is why the institutional players who have spent years courting crypto and blockchain plays are still not flooding in as expected. They are not waiting for permission. They are waiting for infrastructure they can trust.
A Legal Framework That Makes Sense
For modernization, this means we can’t keep making exceptions. Temporary no-action relief, waivers, or parallel sandboxes are not durable and will not encourage institutional adoption. Real modernization means crafting new laws and regulations and updating them to reflect new realities made possible through new technologies.
The Clarity Act delivers exactly that durable framework. I am particularly grateful to see it advances ideas I suggested last month during the U.S. House Financial Services Committee Hearing on Tokenization and the Future of Securities: Modernizing Our Capital Markets.
Section 108 requires the SEC to modernize securities regulations for digital asset activities by tailoring existing rules, including those governing customer protection and custody of digital assets, transfer agent requirements, books and records, clearance and settlement, and broker-dealer/ATS/exchange rules, to the unique characteristics of distributed ledger technology. Critically, it explicitly calls out the use of “vaults” and digital asset receipts as an area for SEC regulatory follow-up. This directly addresses practical onchain settlement challenges and will unlock institutional adoption of tokenized real-world assets in the United States.
Section 505 provides a clear statutory pathway for tokenized securities. It defines tokenization and establishes parity in regulatory treatment: a tokenized security shall be treated, for all regulatory purposes, as the security it represents (subject to limited, targeted adaptations). This is the kind of technology-neutral, risk-based clarity the market has been waiting for.
We also welcome Section 107’s modernization of recordkeeping requirements to facilitate distributed ledger records, as well as the CFTC-SEC Micro-Innovation Sandbox in Section 501, which creates structured space for responsible experimentation while maintaining strong guardrails.
These provisions, along with robust customer property protections in Title VII and clear treatment of decentralized governance systems, directly reflect Plume’s recommendations and will bring the worlds of DeFi and TradFi together in a regulated, scalable way.
As Plume also progresses its regulatory strategy, beginning with our Transfer Agent approval in September 2025, we are encouraged by this progress on the Clarity Act. This bill will unlock massive opportunities for tokenization entrepreneurs like Plume, as well as legacy financial institutions who share a common interest in ensuring the continued completiveness of U.S. capital markets.
Whether the bill passes in its current form or evolves further, we expect the SEC to move forward with additional reforms that create opportunities for Plume to play a central role in developing regulated, onchain capital markets.
Assets Are Already Onchain
Regulatory progress matters because tokenization is not a crypto sideshow anymore. Treasuries, money market funds, private credit, equity, the assets that move global finance are migrating onchain. The question is not whether that happens, but where. Singapore, Hong Kong, the EU, the UAE: every serious jurisdiction has decided to be a venue for this.
There is a version of the next decade where U.S. capital markets, already the deepest, most liquid, most trusted in the world, extend that lead by absorbing onchain, globally scalable infrastructure into their existing regulatory perimeter. In this space, customer protection is preserved, market integrity is enforceable, capital formation gets cheaper and faster for the small and mid-sized issuers who have been priced out for a generation, and illicit finance gets harder, not easier, because public ledgers are more legible than legacy plumbing when you have the right tools and the right rules.
The Clarity Act puts the United States firmly on that path. Crypto skeptics often say the industry just wants to escape regulation. Some in the industry do, based on ideological principles, and there should be plenty of surface area to preserve for innovation without licensing approvals, for example in the development of non-custodial protocols without a commercial business around it. But the serious people in this space, the ones who have built businesses, talked to Congress, and lived through enforcement cycles, are asking for rules that fit for the purpose of unlocking globally scalable, onchain capital markets.
Plume strongly endorses the Digital Asset Market Clarity Act because it does exactly that. We urge Congress to pass it swiftly. Yes, the bill is not perfect, but in areas where it may be deficient, e.g. ensuring a base level of customer protection, disclosure, accountability, and implementation of cybersecurity best practices at the retail-facing app-level, the bill sets in motion a Hegelian dialectic where these deficiencies will surface and prompt future legislative action.
The future of American financial leadership is onchain, and this bill ensures we get there responsibly, with trust, accountability, and innovation all working together.