Crypto Regulation Bill Could Enable Illicit Activities, Experts Warn

The Digital Asset Market Clarity Act (CLARITY Act) aims to provide clarity and regulation in the cryptocurrency market. However, experts at the Center for American Progress warn that this legislation could have unintended consequences.

Cryptocurrency has brought new challenges in governance, particularly with decentralized finance (DeFi), which allows pseudonymous transactions and rapid evolution of platforms. This makes it difficult for regulators to track illicit activities.

The CLARITY Act would create statutory loopholes that bind regulators' hands, effectively facilitating illicit transactions and undermining national security efforts. This is concerning because DeFi presents massive national security risks, as evidenced by the use of cryptocurrency by North Korea's regime to evade sanctions and launder funds for its nuclear war program.

North Korea has stolen billions of dollars in cryptocurrency assets through cybercrime, including $1.4 billion from Bybit in February 2025. The regime then routes these funds through Uniswap and other decentralized exchanges before converting them into fiat currency. This is not an isolated incident; U.S. adversaries such as Russia and Iran also use cryptocurrency to finance illicit activities.