Key Highlights
- Joseph Chalom said the Blockchain Regulatory Certainty Act (BRCA) could become the most important provision in the CLARITY Act.
- He argued BRCA would protect non-custodial DeFi developers from being treated as regulated money transmitters.
- Chalom said stablecoins, tokenized assets, and AI-driven finance are increasingly relying on open blockchain infrastructure.
As Senate negotiations over the CLARITY Act continue, Joseph Chalom, CEO of Sharplink and former Head of Digital Assets Strategy at BlackRock, argued that the legislation’s most consequential debate may not be the issues receiving the most attention.
In a detailed article shared on X, Chalom said discussions around stablecoin yield rules and crypto ethics provisions have dominated public debate. However, he argued that Section 604, which includes the Blockchain Regulatory Certainty Act (BRCA), could determine whether the U.S. remains competitive in decentralized finance (DeFi).
According to Chalom, BRCA could provide legal clarity for developers building non-custodial blockchain applications by establishing that software creators who do not control user funds should not be treated as money transmitters.
BRCA at the center of DeFi debate
Chalom described BRCA as a provision designed to clarify that developers who create software without taking custody of user funds should not be classified as money transmitters. He argued that this principle is essential for protecting permissionless, non-custodial financial infrastructure built on blockchain networks.
According to Chalom, DeFi developers have faced two major legal uncertainties over the past decade: whether protocols could be considered unlicensed money transmitters or whether they could fall under securities exchange regulations.
He said that without legislative protection, DeFi’s future remains dependent on changing regulatory interpretations and court decisions. “CLARITY is the first real chance to move that protection from ‘for now’ to ‘in law,’” Chalom said.
The comments come as lawmakers continue negotiations over the crypto market structure bill, with discussions focused on several issues including stablecoin economics, ethics requirements, enforcement authority, and digital asset oversight.
How DeFi is expanding beyond crypto
Chalom argued that DeFi is no longer limited to crypto trading and is becoming part of a broader financial infrastructure stack. He pointed to several areas where blockchain-based systems are expanding, including:
- Stablecoins as digital payment infrastructure.
- Tokenized real-world assets such as Treasuries, credit products, commodities, and equities.
- AI-powered financial applications using blockchain settlement systems.
Chalom said these emerging financial systems depend on open-source blockchain infrastructure and argued that BRCA could provide the legal foundation needed for continued development.
“The money, the assets, the automation. Every layer of that stack executes through open source code, which is exactly what the BRCA aims to protect,” he wrote.
Institutional adoption requires regulatory clarity
The former BlackRock executive also highlighted growing institutional involvement in blockchain markets, arguing that large financial firms require regulatory certainty before committing significant resources.
According to Chalom, institutions are already exploring tokenized assets, blockchain settlement, and on-chain financial products but need predictable rules to expand further.
“Institutions do not build on foundations that shift every four years,” he wrote, adding that financial companies prioritize regulatory stability and neutrality.
He also warned that uncertainty could encourage developers and businesses to move operations to jurisdictions with clearer blockchain regulations.
Pierce highlights DeFi’s growing role
Chalom also pointed to recent comments from SEC Commissioner Hester Peirce, arguing that regulators are increasingly recognizing DeFi’s potential role in financial markets. At the time, Peirce said that as securities move onchain, “vaults and onchain lending strategies may become mainstream tools for managing investment portfolios.”
Chalom said those comments show that DeFi infrastructure is moving closer to traditional finance. However, he noted that regulatory agencies alone cannot provide permanent certainty because future administrations could change enforcement approaches.
CLARITY Act faces narrow legislative window
Chalom’s comments come as lawmakers work to finalize the CLARITY Act before the Senate’s August recess. The legislation has faced disagreements over several issues, including stablecoin economics, ethics rules, enforcement authority, and provisions affecting blockchain developers.
Industry participants have argued that passing the bill with clear DeFi protections could help establish the U.S. as a leading jurisdiction for blockchain innovation. However, opponents have raised concerns about ensuring adequate consumer protections and preventing misuse of decentralized systems.
As Senate discussions continue, the BRCA provision has emerged as one of the key areas that could determine how lawmakers approach decentralized finance and blockchain development in the years ahead.
Also Read: Senator Lummis Seeks Senate Action on CLARITY Act Before August Break
