The Crypto Market Structure Act: 5 Key Reforms to Expect for Institutional Maturity

By Nirup Ramalingam, CEO, and Steve Bartfield, CPO of BridgePort

Published in TabbForum

July 29, 2025 – As the Digital Assets Market Clarity Act of 2025 (CLARITY Act) gains traction, the debate has often centered on which regulator “wins” jurisdiction, but there's much more at stake, write BridgePort's CEO Nirup Ramalingam and Chief Product Officer Steven Bartfield. The CLARITY Act will not only give institutions the confidence to develop their digital asset strategies, but will also serve as a regulatory template for other major financial hubs.

The crypto industry stands at a pivotal juncture. As the Digital Assets Market Clarity Act of 2025 (CLARITY Act) gains traction, the debate has often centered on which regulator “wins” jurisdiction.

Having spent over a decade navigating Dodd-Frank’s complexities across multiple jurisdictions, we see this slightly differently. The CLARITY Act isn’t a turf war, it’s a necessary step towards institutional maturity whose impact on the crypto market will mirror that of Dodd Frank’s impact on the derivatives market.

The bill pragmatically grants the Commodity Futures Trading Commission (CFTC) the “lion’s share” of authority over spot digital commodities, while the SEC retains oversight for initial offerings and “restricted digital assets.” This mirrors Dodd Frank’s landmark Title VII carve-out , which cleanly divided swaps between regulators and prompted market participants to build compliant infrastructure under clear regulatory frameworks. This “decentralization test” for classification, moving beyond the static Howey test, is a welcome evolution. But the real story for institutional crypto lies not in the jurisdictional split, but in the implications of a CFTC-led framework for market structure and integrity.

BACK TO THE FUTURE

Our experience implementing Dodd-Frank’s sweeping reforms in the derivatives markets offers a powerful parallel. Prior to Dodd-Frank, much of the swaps market operated bilaterally, with opaque pricing, limited reporting, and significant counterparty risk. The introduction of Swap Execution Facilities (SEFs), stringent capital and operational standards for Derivatives Clearing Organizations (DCOs), rigorous pre-trade risk controls and margin requirements for Futures Commission Merchants (FCMs), Swap Dealers (SDs), and Major Swap Participants (MSPs), and the establishment of Swap Data Repositories (SDRs) that illuminated previously dark trading activity and fundamentally transformed that landscape.

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These reforms rolled out in waves across the entire ecosystem, delivering:

1. Segregation of Customer Funds: The CFTC’s LSOC framework protects customer assets from exchange default. CLARITY mandates that exchange-held customer assets remain fully segregated, preventing another FTX-style collapse from eroding client funds. In practice, when a pension fund trades Bitcoin, their assets will be held with an independent, certified custodian rather than commingled with exchange operational funds.

   
   

2. Market Integrity & Resiliency: Dodd-Frank required clear separation of execution, clearing, and custody was combined with robust Anti-Money Laundering (AML) and Know-Your-Customer (KYC) requirements. The CLARITY Act mirrors this framework mandating comprehensive requirements for all registered crypto intermediaries. Trading venues must demonstrate the same standards as traditional exchanges – business continuity plans, disaster recovery and cybersecurity frameworks.

   
   

3. Enhanced Transparency: Dodd-Frank’s mandatory reporting to Swap Data Repositories (SDRs), gave institutional asset managers reliable mid-market pricing data for the first time. The CLARITY Act requires comparable order-display and execution-reporting rules for digital-asset venues. This enables institutional investors to obtain the pricing benchmarks and trade data they need for portfolio valuation and risk-management.

   
   

4. Surveillance & Accountability: Regulated venues must implement real-time market surveillance alongside large-trader reporting.When a hedge fund executes a significant Bitcoin trade, the transaction will be monitored in real time for market manipulation reported to regulators, and stored for audit purposes which is the same oversight that exists in traditional commodity markets.

   
   

5. Operational Resilience & Custody Assurance: Platforms must maintain fail-over data centers, run periodic stress tests, and publish business continuity plans. Financial institutions will require third-party partners to hold SOC 2 and ISO 27001 certifications, providing the verifiable audit trails needed for institutional compliance.

PATH AHEAD

For the institutional crypto market, the passage of this bill would usher in a new era of certainty and, crucially, liquidity. Institutions thrive on clarity, especially the holy grail that crypto natives are waiting on, traditional asset managers. Knowing which regulator is in charge, what the rules of engagement are, and that basic investor protections (like fund segregation) are mandated will unlock significant capital currently sitting on the sidelines. We anticipate:

• Increased Institutional Participation: Major financial players, currently hesitant due to regulatory ambiguity, will gain the confidence needed to enter the U.S. crypto market more aggressively.

• Enhanced Product Development: With a clearer regulatory runway, financial innovators can develop more sophisticated, compliant crypto products and services.

• Improved Market Efficiency: The standardization and oversight will foster deeper liquidity pools and tighter spreads, benefiting all participants.

  
  

Historically, first-mover regulatory frameworks become global standards. Just as Dodd-Frank’s derivatives reforms spawned global equivalency frameworks, we expect the CLARITY Act to serve as a template for other major financial hubs grappling with crypto regulation. The industry should embrace this framework as an opportunity, not an obstacle. For institutional participants, the time to prepare is now – understanding these requirements and building compliant infrastructure will determine who thrives in tomorrow’s regulated crypto markets.

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Nirup Ramalingam is the CEO of BridgePort, the institutional coordination layer for the off-exchange settlement of crypto through credit allocation and post-trade facilitation designed to address the capital inefficiency, credit risk, and fragmented liquidity that currently exists in crypto markets. Prior to becoming CEO of Bridgeport, Nirup, spearheaded the institutional crypto trading platform at CME owned EBS and most recently served as the COO of NEX SEF responsible for managing CME’s SEF and MTF platforms for FX and IRS derivatives.

Steven Bartfield, is the Chief Product Officer (CPO) of BridgePort, the institutional coordination layer for the off-exchange settlement of crypto through credit allocation and post-trade facilitation designed to address the capital inefficiency, credit risk, and fragmented liquidity that currently exists in crypto markets. Prior to becoming Bridgeport’s CPO, he had nearly 15 years of experience across institutional trading, market structure, and financial technology with tenures in Credit Market Structure Strategy at Goldman Sachs and senior product leadership roles at CME Group.

Reposted from Source: TabbForum