A New Wave of Digital Asset Legislation: Updated CLARITY and PARITY Drafts Sharpen the U.S. Framework

June 4, 2026

The legislative framework for U.S. digital assets has, in a remarkably short period, moved from theory to text. Following enactment of the GENIUS Act in July 2025, which established the first federal regulatory regime for payment stablecoins, Congress has continued to advance the next two building blocks: the Digital Asset Market Clarity Act (the “CLARITY Act”), which divides crypto assets between the SEC and CFTC, and the Digital Asset PARITY Act, which would rewrite the Internal Revenue Code’s treatment of stablecoins, lending, staking, mining, and charitable donations of crypto. Updated drafts of both bills have now been circulated, and each tightens, restructures, and, in important respects, materially changes the prior versions. This alert summarizes the most consequential changes and considers what they could mean for market participants if enacted.

Key Changes: The CLARITY Act

The updated Senate substitute to H.R. 3633 retains the basic architecture of the January 2026 draft, with the most significant changes concentrated in three areas: the securities-law treatment of network tokens, stablecoin economics, and customer property protections.

Reframing Title I around network tokens and adding insider trading clarity. The new draft renames Section 105 from “Financial interests of ancillary assets” to “Characteristics of network tokens,” reorienting the analysis toward characteristics of the token itself and adding safe harbors clarifying that decentralized governance systems will not be treated as persons under “common control” for purposes of the disclosure regime. An entirely new Section 109 (“Application of insider trading laws”) expressly provides that Rule 10b-5 does not reach secondary-market transactions in an ancillary asset where the transaction itself is “not otherwise a transaction in a security.” For founders and trading venues, this directly addresses a long-running concern that ancillary-asset secondary trading could be swept into anti-fraud liability under the federal securities laws despite the broader policy goal of treating these assets as commodities.

A harder line on stablecoin yield. The most consequential substantive change is in Title IV. The prior Section 404, “Preserving rewards for stablecoin holders,” prohibited a digital asset service provider from paying interest or yield “solely in connection with the holding of a payment stablecoin,” subject to broad carve-outs for activity-based rewards. The new draft renames the section “Prohibiting interest and yield on payment stablecoins” and substantially hardens it: the prohibition now reaches any “covered party” (the service provider together with its affiliates) and forbids payments that are either tied to holding a stablecoin or that are “economically or functionally equivalent to the payment of interest or yield on an interest-bearing bank deposit.” An anti-evasion rule has been added, and willful violations carry a civil monetary penalty of up to $5 million per violation. The drafters explicitly find that deposit-equivalent payments “may inhibit depository institutions’ key functions in the economy,” signaling that concerns about deposit flight raised by the banking industry have been credited. In short: yield-bearing stablecoin products and quasi-yield workarounds have a much narrower runway than under the prior draft.

New customer-property protections and a “Build Now” provision. Title VII has been expanded by a new Section 702, “Insolvency safe harbor,” supplementing Section 701’s customer-property protections for ancillary assets and digital commodities in bankruptcy. The new Section 702 reflects a continued tightening of how customer crypto is treated when an intermediary fails, an issue that has dominated U.S. crypto insolvency proceedings since 2022. Separately, Title IX adds a new Section 904, the “Build Now Act,” which streamlines permitting and regulatory processes for digital asset infrastructure as part of the bill’s “other matters” provisions.

Key Changes: The PARITY Act

The PARITY Act (the Digital Asset Protection, Accountability, Regulation, Innovation, Taxation, and Yields Act) is sponsored by Representatives Max Miller (R-OH) and Steven Horsford (D-NV) and is designed to bring the U.S. tax code into the digital era by clarifying the tax treatment of stablecoins, digital asset trading, lending, staking, mining, charitable donations, and investment trusts.

Stablecoins: a redesigned non-recognition rule. The prior draft proposed a new IRC § 139J that would exclude from gross income any gain on the sale or exchange of a “Regulated Payment Stablecoin,” subject to a peg-and-price-stability test and an “exception for significant gain or loss” outside the 99¢–$1.01 band. The new bill replaces that approach with a new IRC § 1046 (“Regulated Payment Stablecoin Transactions”) situated in the capital gains subchapter. Under the new rule, no gain or loss is recognized on the sale or exchange of a regulated payment stablecoin “unless the taxpayer’s basis in such stablecoin is less than 99 percent of the redemption value of such stablecoin,” with the acquirer’s basis deemed to be $1 in any exchange. The qualifying definition is also tighter: the stablecoin must be issued by a permitted payment stablecoin issuer under the GENIUS Act, the issuer must be obligated to convert, redeem, or repurchase for a fixed dollar amount, and the taxpayer must have acquired it within 1% of $1.00. Functionally, the new section achieves much the same result as the prior deemed-basis approach but in cleaner, more administrable statutory form.

Broad de minimis for consumer payments dropped; study substituted. The prior draft’s most consumer-facing concept, a per-transaction de minimis threshold analogous to the section 988 foreign-currency exception, has been dropped. The new bill instead directs Treasury to study the issue and report to Congress within one year, with interim guidance within 180 days. The PARITY one-pager candidly acknowledges that earlier proposals “failed to win bipartisan consensus” on revenue and administrability grounds. The practical message: everyday “buy-coffee-with-crypto” relief remains a policy aspiration, not a present-law fix.

Wash sale, mark-to-market, and constructive sales now in statutory text. Each of these securities-tax parity provisions, which were either placeholders or skeletal in the prior draft, has now been fully drafted. New Section 5 rewrites IRC § 1091 to apply to “specified assets,” defined to include any digital asset, with a detailed “substantially identical” test that turns on economic exposure and treats differences in voting rights, trading venue, or blockchain as irrelevant. New Section 6 extends the mark-to-market election under § 475 to dealers and traders in “actively-traded digital assets,” and new Section 7 amends § 1259 to apply constructive-sale rules to digital assets.

A fully built-out staking and mining regime. The biggest substantive build-out is Section 8, which creates a new Subchapter W—”Digital Assets Acquired Through Validation Activities”—with three new Code sections (§§ 1400W-1 through 1400W-3). The default rule is that the fair market value of a newly created digital asset acquired by a validator is included in gross income as ordinary income at receipt. Taxpayers may elect, however, to defer inclusion until disposition, for up to five successive taxable years, after which the deferred amount is recognized as ordinary income and any subsequent appreciation is taxed as long-term capital gain. This codifies the “bridge” between immediate-realization and full-deferral approaches that the prior draft only described in policy terms.

Stricter rules for charitable contributions. New Section 9 implements a two-track approach: actively traded digital assets are added to the qualified-appraisal exception of § 170(f)(11), while infrequently traded digital assets contributed at claimed values above $500 must be substantiated by a contemporaneous written acknowledgment and the deduction is capped at the charity’s gross sale proceeds. A new § 6720D imposes penalties on donee organizations that knowingly furnish false acknowledgments.

UBTI, investment-trust clarity, and uniform definitions. Section 10 amends § 7701 to provide that “passive staking” is not a trade or business for purposes of §§ 512 and 864 (the UBTI and ECI provisions), and clarifies that a trustee of a digital asset investment trust may stake (or delegate staking) without violating the long-standing prohibition on “powers to vary the investment” of certificate holders. This relief is principally aimed at pension funds, endowments, ETFs, and investment trusts that have stayed on the sidelines to avoid UBTI reclassification risk. New Section 11 creates a uniform glossary in § 7701(q) covering digital asset, digital asset exchange, actively traded digital asset, eligible digital asset, traded digital asset, validation activity, mining, and staking, with inflation adjustments to the $50 million volume and $10 billion market-cap thresholds for “actively traded” status.

Potential Industry Impact

If both bills are enacted in substantially their current form, the U.S. regulatory and tax framework for digital assets will look dramatically different by the end of 2026. Several themes stand out.

Jurisdictional clarity will finally arrive, largely on the industry’s terms. The CLARITY Act’s three-part taxonomy (digital commodities, investment contract assets, and permitted payment stablecoins) resolves the SEC-vs.-CFTC turf war that has defined the past five years of crypto enforcement. Combined with the SEC’s “Project Crypto” initiative and increased SEC-CFTC coordination, the institutional environment for crypto regulation is more aligned than at any prior point. The new Section 109 on insider trading and the renamed Section 105 on network token characteristics further narrow the residual SEC footprint over secondary trading of non-security tokens.

Compliance burdens will increase, particularly for stablecoin distributors. The hardened Section 404 on stablecoin yield will require digital asset service providers to re-examine every customer-facing rewards, rebates, loyalty, and incentive program tied to stablecoin balances or activity for “economic or functional equivalence” to deposit interest. With civil penalties of up to $5 million per violation and an explicit anti-evasion provision, the cost of getting these programs wrong is meaningful. The CFTC has separately signaled that “payment stablecoins” are acceptable as margin collateral but may not be used for investment of customer funds, reinforcing that stablecoins are increasingly treated as cash equivalents in some contexts and bank deposits in others.

Tax certainty should unlock institutional capital. The PARITY Act’s UBTI carve-out for passive staking and the digital asset investment trust safe harbor address two of the principal tax-law roadblocks that have kept pension funds, endowments, and ETF sponsors out of the staking market. The validator-deferral election addresses the “phantom income” problem that has historically penalized U.S.-based validators. Together, these provisions support the bill’s broader thesis that durable tax certainty is necessary to keep capital onshore.

Some innovation pathways will tighten. Conversely, the wash-sale and constructive-sale extensions and the mark-to-market election for dealers and traders reflect the bipartisan view that, where digital assets function economically like securities, they should be taxed like securities. The narrowing of qualified-appraisal relief to genuinely liquid assets, paired with the “charity-realized proceeds” cap and the § 6720D donee penalty, substantially limits the prior practice of inflated valuations on illiquid token donations.

Existing regulatory guidance is converging with the legislation. The CFTC’s recent FAQ on use of payment stablecoins, BTC, and ETH as margin collateral and the SEC staff’s April 2026 guidance on broker-dealer registration for crypto user interface providers both reflect the same proactive, framework-building posture that animates the CLARITY and PARITY drafts. For market participants who have been waiting for clarity before deploying compliance resources, the convergence of agency guidance and statutory text suggests that the cost of delay is no longer “we don’t know the rules”; it is the risk of being unprepared when those rules go live.

Conclusion

The updated CLARITY and PARITY drafts are the most concrete signal yet that Congress intends to follow the GENIUS Act with a comprehensive federal framework for digital asset markets and taxation. Industry participants should watch for three developments as these bills progress: (i) whether the hardened stablecoin yield prohibition survives Senate negotiations or is softened to preserve activity-based rewards; (ii) whether the de minimis consumer-payment exemption is reintroduced after Treasury’s mandated study; and (iii) whether Title I’s reframing around “characteristics of network tokens” and the new insider trading carve-out hold through markup. For founders, fund sponsors, and intermediaries, the message is the same as it was at the start of this cycle: the regulatory environment is more favorable than it has ever been, but it is also more complex, and the companies that have been investing in compliance infrastructure will be the ones best positioned to benefit when these bills become law.

For further information, contact: Michael Frisch (mfrisch@crokefairchild.com), David Lopez-Kurtz (dlopezkurtz@crokefairchild.com), Tanner Dowdy (tdowdy@crokefairchild.com), Ariella Guardi (aguardi@crokefairchild.com), Bakhtawar Mirjat (bmirjat@crokefairchild.com), or Max Markoff (mmarkoff@crokefairchild.com).