As the Senate Banking Committee convenes today, January 15, 2026, to mark up the Digital Asset Market Clarity Act, former SEC Chief Accountant Lynn Turner is urging lawmakers to strengthen the bill’s investor-protection backbone—arguing the draft, as written, is “severely deficient” and risks enabling “another FTX‑type fraud.”
The CLARITY Act—which uses House-passed H.R. 3633 as base text—aims to delineate the Securities and Exchange Commission’s (SEC) and Commodity Futures Trading Commission’s (CFTC) roles, set standards for stablecoins, and clarify treatment for decentralized finance (DeFi), and software developers.
Republican lawmakers promoted the bill as a balance of innovation with strong investor protections and tough law enforcement tools.
Turner’s Core Critique: Absence of Sarbanes–Oxley‑Level Safeguards
In a five-page letter sent January 13 to the Senate Banking and Agriculture committees, however, Turner warns that the draft lacks the transparent, reliable, and timely financial information needed for robust oversight and informed investment decisions. He calls for explicit statutory amendments requiring:
- digital asset service providers (DASPs) and asset originators to publish annual audited financial statements and periodic interim reports;
- preparation of financial statements under U.S. GAAP for domestic companies or IFRS for foreign companies;
- certification of financial statements by the chief executive officer and the chief financial officer;
- certification by asset originators and DASP executives that internal controls over financial reporting (ICFR) are properly designed, implemented, and operating effectively;
- independent audits of financial statements by PCAOB‑registered firms, subject to PCAOB inspection; and
- provision of strong enforcement tools to regulators and the Department of Justice to address fraud and illegal acts.
Turner frames his recommendations in the context of historic failures—from the FTX collapse to the Enron and WorldCom era—arguing that robust disclosures and control audits restored trust after past crises and are essential again.
Republican committee leaders and supporters meanwhile counter that the CLARITY framework replaces uncertainty with clarity, assigns jurisdiction to the appropriate agency, establishes joint SEC–CFTC coordination, and strengthens disclosure and anti‑fraud authorities.
The bill protects software developers who do not control customer funds, preserves self‑custody, and clarifies sanctions obligations, and requires centralized digital asset intermediaries that interact with DeFi protocols to implement risk management standards. The Senate Banking Committee’s Myth vs. Fact also highlights what it calls the “strongest illicit finance framework Congress has ever considered” for digital assets.
Further, the bill is described as “designed to prevent future FTX collapse—providing regulatory framework where investors are informed about material risks, insiders are prevented from manipulating markets, and bad actors are penalized.”
However, Turner’s letter sharpens the focus on core investor‑protection mechanics—audited financials, internal controls, and PCAOB oversight—that he says are indispensable to preventing the next crisis.
He points out that the Genius Act of 2025, which established federal framework for payment stablecoins, requires financial statement audits of stable value coin issuers. It also requires the audit be a PCAOB-registered firm.
“This however is misleading to the public, as the Genius Act also includes language intended to prevent the PCAOB from inspecting and overseeing audits of stable coin issuers,” Turner explains. “Accordingly, the audit firm can market itself as a PCOAB registered firm, but is not subject to the oversight and inspection by that agency. Such actions will only serve to destroy rather than further confidence in our financial and digital asset markets.”
The markup follows weeks of behind‑the‑scenes negotiations over how far to restrict stablecoin yield, where to draw lines around DeFi control and liability, and how to split spot‑market oversight between the SEC and CFTC.
Senator Elizabeth Warren, (D-MA), the ranking member of the Senate Banking Committee, warned the bill could weaken SEC authority and, alongside an executive order enabling crypto in retirement accounts, create a “tokenization loophole” that puts 401(k) savings at risk.
The American Bankers Association (ABA) and other allied groups are concerned, urging Congress to close stablecoin reward “loopholes,” arguing indirect yield via exchanges could siphon trillions in deposits from community banks and undermine local lending.
Treasury analysis warns up to $6.6 trillion in deposits may be at risk if inducements persist; seek explicit bans on third‑party yield schemes.
Some in the crypto industry supports market clarity but oppose expanding stablecoin interest bans beyond issuers and argue that Congress deliberately preserved lawful rewards by platforms and intermediaries.
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