In brief
- The Senate voted 49-50 against advancing the Clarity Act. Democrats united in opposition, joined by three Republicans. While this led to blame games among party members, a group of seven Democrats described it as “a setback, but not the end.”
- As frustrations with Congress mount, industry leaders are looking to regulators for support. Kristin Smith from the Solana Policy Institute suggested that guidance from agencies is currently the most practical path forward.
- Both the SEC and CFTC are making moves: SEC Chair Paul Atkins has linked a new tokenized stock innovation exemption to the failure of the bill, while the CFTC has announced no-action relief and is sending broader crypto rulemaking to the White House.
For those following crypto policy developments in Washington, this past week was notably exhausting. It signifies a shift of focus from Congress to regulatory bodies.
On Tuesday, a key market structure bill for crypto was voted down in a significant procedural outcome, reflecting the ongoing divide exacerbated by former President Trump’s involvement in crypto issues, which has diminished Democrats’ willingness to collaborate with Republicans on necessary regulation.
Democrats unanimously opposed the measure while Senators Susan Collins (R-ME), Josh Hawley (R-MO), and Jerry Moran (R-KS) also voted against it. Notably, Senator Thom Tillis (R-NC) initially supported the bill but switched to oppose it, allowing the possibility of revisiting the issue later on.
The final vote stood at 49-50, still falling short of the 60 votes required to pass after extensive bipartisan discussions lasting over a year.
Inside the Capitol, negotiations were ongoing right up to the voting moment. A Democratic staff member revealed that Tillis was open to delaying the vote for further talks, but a decision by Senate Banking Committee Chair Tim Scott’s staff abruptly terminated those discussions without any clarification.
This fallout led to a blame game between the parties, with Republicans claiming Democrats weren’t serious about the bill and, in turn, Democrats accusing their counterparts of rushing the vote to protect Trump-related interests.
According to Senator Cynthia Lummis (R-WY), who played a pivotal role in drafting the bill, “Senate Democrats proved they were never truly serious about protecting consumers and preserving American leadership.” She mentioned her commitment during negotiations while suggesting that Democrats engaged in unproductive tactics.
However, some Democratic senators who voted against the bill maintained that it’s not doomed. Senator Angela Alsobrooks (D-MD) expressed optimism right after the vote, stating, “It’s not going to die. Over 70 million Americans are engaged in an unregulated industry, and we have a responsibility to regulate.”
Alongside her, six other negotiating Democrats echoed this sentiment, calling the vote “a setback, but not the end,” and reaffirming their commitment to work together for the Clarity Act’s passage.
This intention comes amidst initial efforts to rekindle bipartisan discussions as both sides assess opportunities to negotiate again, according to sources familiar with the situation.
Nevertheless, there’s a palpable tiredness in the industry, with many now turning to regulators for defining the framework instead of waiting on congressional action.
Kristin Smith from the Solana Policy Institute noted, “Congress had its chance to push the Clarity Act but failed to muster the political will. We’re now looking to regulators for guidance—the more realistic path right now.”
Meanwhile, SEC Chairman Paul Atkins highlighted that the agency’s new innovation exemption is tied to the failed advancement of the Clarity Act, which was announced recently. This change opens the door for trading tokenized U.S. stocks on-chain, igniting fresh enthusiasm within the industry.
Similarly, the CFTC is progressing; it has provided a no-action stance for passive software providers, and a broader cryptocurrency rulemaking proposal has been submitted to the White House, though specific details haven’t been made public yet.
In summary, the industry is gaining some form of clarity, albeit from regulatory avenues rather than legislative ones.
