For over a decade, the U.S. has had no comprehensive federal framework governing digital assets. And the people who benefited most from that gap were the criminals. According to Chainalysis's 2026 Crypto Crime Report, criminals moved a record $154 billion through crypto wallets globally in 2025. In the U.S. alone, the FBI received over 180,000 crypto crime complaints last year claiming $11.4 billion in losses to crypto fraud.Now, the Wild West era of crypto may be coming to a close. The Digital Asset Market Clarity Act (“the CLARITY Act”) is on the Senate calendar and heading for a vote. The White House is pushing hard for a presidential signature by July 4. Together with the GENIUS Act - which was signed into law in 2025 and sets the rules for stablecoin issuers - it would finally close that gap.However, it's not yet certain whether or when the CLARITY Act will pass the Senate. And even if it does, the question is whether it goes far enough - particularly regarding unhosted wallets, decentralized finance (DeFi) exemptions, and offshore stablecoin transactions. The faster the bill moves to meet the July 4 deadline, the less room there will be to address these crucial gaps. In this article, I'll unpack what the CLARITY Act changes, where the gaps are, and what it means for banks and compliance teams if it passes.What the Act ChangesThe CLARITY Act will make crypto exchanges and other digital asset intermediaries accountable under the Bank Secrecy Act (BSA) - the U.S. law that requires financial institutions to do their part to detect and prevent money laundering. In practice, that means these businesses will have to do what banks have been doing for decades: run anti-money laundering programs, carefully verify who their customers are, monitor transactions, and report suspicious activity.The Act covers the ongoing monitoring of digital asset activity, working in tandem with the GENIUS Act, which governs stablecoin issuance. Together, the bills are the two pillars of a comprehensive regulatory framework that aims to regulate the full digital asset lifecycle.This framework complies by design with the guidelines laid out by the Financial Action Task Force (FATF), the intergovernmental body that defines global standards for combating money laundering and terrorist financing. Compliance regimes work best when they're consistent both within and across borders. By aligning with FATF standards, the CLARITY Act aims to close the gaps between the US and other jurisdictions that criminal networks have become so adept at exploiting.Where the Gaps AreThe CLARITY Act goes further than any previous U.S. legislation to bring crypto firmly under the financial crime compliance umbrella. The problem is what it leaves out.The most glaring gap in the CLARITY Act is regarding unhosted wallets. These are crypto wallets that are stored on a personal device rather than held in a regulated exchange or with a regulated custodian. Because there's no intermediary involved, there's no one to screen transactions or trace where the money goes. An individual can hold millions of dollars on a phone, cross a border, and transfer those funds to another unhosted wallet - all completely outside the view of regulators.The DOJ has documented cases where unhosted wallets were used to funnel money to designated terrorist organizations. FATF's March 2026 report singled out unhosted wallets as a top risk, noting that illicit crypto is increasingly routed through them to obscure the money trail. The CLARITY Act's explicit protection of unhosted wallets is a missed opportunity.And the CLARITY Act’s blind spots don't stop there:DeFi: the biggest unresolved issue. Most crypto transactions go through a centralized exchange like Coinbase or Kraken. These are recognized companies that can be regulated, audited, and held accountable. Decentralized finance (DeFi) platforms cut out that middleman entirely. They let users trade, lend, and borrow crypto through automated code running on a blockchain. The Act doesn't require these platforms to meet the same anti-money laundering (AML) obligations as traditional exchanges. Crypto mixers: the sanctions gap. Mixing services break the trail between sender and receiver - they pool crypto from multiple sources, shuffle it together, and redistribute it so that no transaction can be traced back to its origin. Some, like Tornado Cash, have been directly linked to laundering funds for sanctioned states and criminal networks. The Act does not give the Treasury Department the tools it would need to sanction or shut down these services. Offshore stablecoin evasion. U.S. financial sanctions work by cutting off sanctioned actors from the dollar-based financial system. Stablecoins create a workaround. They hold a fixed dollar value and move through crypto networks rather than banks. This means that an individual outside the U.S. can send dollar-equivalent value to a sanctioned actor without ever touching the U.S. banking system. Neither the GENIUS Act nor the CLARITY Act comprehensively covers this scenario, leaving a gap between the two that sanctioned actors can walk right through.The travel rule gap. When money moves between banks, the sender is required to share identifying information about both parties - who sent it and who's receiving it. The same principle applies to crypto transfers between service providers, but only above a certain transaction value. The EU and UK set that threshold at zero - every transfer is covered. The U.S. sets it at $3,000, and the CLARITY Act leaves that threshold unchanged. This means that anyone looking to move crypto without identification can simply break a large transfer into smaller ones and stay below the radar.What This Means for BanksAssuming the CLARITY Act passes, any bank that deals in digital assets - or plans to - will need to make sure its compliance infrastructure can keep up. Large institutions already have the requisite tools and processes in place under the BSA. They just need to apply existing controls to a new class of assets.Mid-sized and community banks will have a bumpier road. Many don't have transaction monitoring systems built to handle crypto activity. And building the technological infrastructure to screen digital asset transactions, flag suspicious patterns, and file the required reports is neither quick nor cheap.There's also a broader market shift to consider. By bringing crypto under federal regulation, the CLARITY Act could accelerate adoption of digital assets - making them safer, more legitimate, and more attractive to mainstream customers. For community banks with already-thin margins, that means more customers moving more money somewhere else.Finally, the CLARITY Act creates a compliance expectation that extends beyond the crypto sector. A 2025 banking trust survey found that 84% of consumers would switch banks if their institution were linked to financial crime. For any bank looking to get into digital assets, getting compliance wrong could be a regulatory problem – but it could also be a fast way to lose customers.The Compliance ReckoningThe CLARITY Act has the potential to reshape crypto in the U.S. and around the world. For over a decade, the absence of a clear federal framework let crypto operate like the Wild West - and the criminals thrived. The CLARITY Act starts the hard work of bringing the rule of law to that frontier, and the industry is better for it. The gaps that remain - unhosted wallets, DeFi, offshore stablecoin evasion, the travel rule - are all solvable. The question is whether regulators will move fast enough to close them - or whether the criminals will get there first.Yes#Cryptocurrency #DigitalAssetsAndrew DaviesGlobal Head of Financial Crime Compliance Strategy ComplyAdvantage18 Jun, 2026