Is There Still Hope After the Clarity Act Rejection? An Analysis of Future Crypto Market Regulation and Prospects

In the voting results, not only did Democrats oppose the measure, but four Republicans also broke ranks to vote against it, namely Susan Collins, Josh Hawley, Jerry Moran, and Thom Tillis. Among them, Hawley and Moran primarily represented local community banks' concerns over deposit outflows, reflecting the traditional banking sector's continued strong resistance to stablecoin yields.

The key factor in the vote was the Democrats, who voted unanimously against the bill, broadly believing that certain ethics oversight provisions contained loopholes, such as barring state attorneys general and federal law enforcement agencies from retroactive enforcement against specific asset holdings. This meant that the bill failed to effectively curb the sitting president and his family from profiting from cryptocurrency projects, prompting the Democratic caucus to vote en masse against it.

Theoretically, there is still a chance to procedurally save the Clarity Act, but passing it in the current Congress is extremely difficult in practice as the Senate is about to enter recess to prepare for the November midterm elections. In response, Senator Cynthia Lummis, the primary sponsor, frankly acknowledged that this session is the last opportunity to advance the bill.

Furthermore, behind the Democrats' unanimous opposition lies severe partisan polarization. Bipartisan negotiations collapsed on the eve of the vote, with Senator Lummis joking that the opposition proposal finally put forward by the Democrats was "not serious," demonstrating that mutual trust between the two parties has dropped to a freezing point. Moreover, the bill faces strong resistance from the traditional banking sector.

Currently, although seven Democratic senators claim they will push for bipartisan cooperation to pass the Clarity Act before the end of the year, industry insiders view this as unreliable. Among them, Nate Geraci, president of The ETF Store, posted on July 17 stating, "Right now, everything is just talk... Don't forget, the previous administration tried to kill crypto. It is completely fair to say that if Harris had been elected in 2024, the crypto industry might be on life support right now (or worse). Under the Biden administration, there was no such thing as bipartisan cooperation on crypto. It was entirely anti-crypto, with regulation conducted by enforcement."

As the Senate shifts its agenda's focus toward the midterm elections, the chances of Congress reopening debate on the bill this year are slim. The earliest opportunity for revival will be pushed back to the post-election 'lame-duck session' or await reorganization after the midterm elections. This also means the bill will likely need to be redrafted and deferred to the next congressional session (2027) before it has another chance of being advanced.

Prior to congressional legislation, the SEC and CFTC continue administrative oversight, utilizing their existing authority to codify regulatory standards, including custody standards, startup fundraising channels, and updates to transfer agent rules. Regarding this, Strategy founder Michael Saylor stated on September 16, 'With the bill stalled, I expect the SEC, CFTC, and Treasury to continue advancing digital asset regulatory rules under existing law.'

The impact on the crypto market is limited. The renewed delay in U.S. legislation will objectively drive some projects and compliant capital toward regions with clear regulatory frameworks, such as the EU, Hong Kong, and Singapore, accelerating the decentralized distribution of the global digital asset ecosystem. For now, the rejection of the bill has had a limited impact on the crypto market. Although it triggered a broad sell-off in cryptocurrencies that day, the market has gradually priced it in and refocused on the Federal Reserve's rate-cut path, changes in U.S. Treasury yields, and the global liquidity environment.

The Clarity Act failed to pass a Senate procedural vote due to traditional banks' opposition to stablecoin yields and Democrats' concerns over ethics oversight loopholes for senior officials. Given partisan gridlock and the upcoming midterm elections, the bill is unlikely to see a breakthrough this year and will highly likely be delayed until 2027. In the meantime, regulation will be enforced by the SEC and CFTC under existing laws. While this move may cause compliant capital to shift overseas, the overall impact on the market remains limited.

This content was translated using AI and reviewed for clarity. It is for informational purposes only.