Senate Rejects CLARITY - But Does it Even Matter?

After over a year of negotiations, compromises, and deliberation, the CLARITY Act has been rejected by the Senate. All participating Democrats voted against the bill, which finished with 49 ‘Yes’ votes, well short of the required 60 to pass the Senate.

But while crypto doomers celebrate their defeat of the bill, industry experts are downplaying the CLARITY’s significance. Innovation will not wait for congress, and the SEC and CTFC remain committed to establishing progressive regulation for the remainder of the Republican term.

Meanwhile, crypto markets appear to have shrugged off the disappointing result, with $BTC holding above $75,000 heading into today’s FOMC meeting.

CLARITY Falls Short as Democrats Sweep Critical Vote

The Democrats have rugged the CLARITY Act, voting against a congressional-level regulatory framework for the world’s fastest growing financial infrastructure stack. Despite the best efforts of negotiators and policymakers, the Senate has rejected CLARITY in a 49-50 cloture vote.

For the Democrats, the opposition to the bill was absolute. All votes from Democratic seats moved against CLARITY as Senator Elizabeth Warren asserted its passing would put the U.S. at risk of an economic crash.

On the Republican side, Susan Collins, Josh Hawley, Jerry Moran and Thom Tillis were the outliers, joining the Democrats in voting against the bill. With CLARITY failing to pass the Senate, advocates are losing hope that the bill will ever find its way into law.

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Prediction market forecasts have plummeted to near zero, with CLARITY ‘s chances of passing before the end of next year sitting at just 20%.

But while this may be the end for the CLARITY Act, industry experts argue that it doesn’t even matter.

What Happens Now?

The CLARITY Act has been front-and-center of crypto policy debate all year, but despite what the Democrats might want you to believe, it’s not the be-all-and-end-all of digital asset regulation. Even without the approval of congress, the SEC and CFTC can still work towards establishing progressive frameworks for the digital asset industry.

Experts have expected CLARITY’s failure all year, and pro-crypto regulators will not be taking this defeat lying down. As Bitwise CIO Matt Hougan stated in a memo from early August, SEC Chair Paul Atkins has telegraphed that the agency is “ready, willing and able to come out with rules that address the same issues [as] CLARITY”.

Hougan’s sentiment was echoed by Coinbase founder Brian Armstrong, who argues that “clarity is coming to crypto regardless”. 

With CLARITY pushed aside, the SEC and CTFC can turn their full attention to implementing crypto legislation independent of congressional oversight. While any applied frameworks could potentially be overturned by a change of administration in the White House, the SEC and CTFC still have until 2028 to lay down pro-crypto regulations.

The 2028 U.S. Presidential election undoubtedly carries significant regulatory overhang, but regulators now have two years to roll out crypto policy without being beholden to some of the compromises drafted into CLARITY itself.

$BTC Holds $75,000 in Face of CLARITY Disappointment

CLARITY’s failure may have dealt crypto-legislation in the United States a tough blow, but apart from a dose of leverage-induced volatility and consequent liquidations, markets were relatively unaffected by the courtroom drama.

After briefly dipping below $75,000 in the wake of the rejected vote, $BTC has reclaimed $76,000. Given the projections of prediction markets and failed negotiations leading into the vote, CLARITY’s failure was largely priced in ahead of the event, resulting in the outcome having a muted impact on markets.

However, that didn’t stop a litany of liquidations on either side of the market. According to Coinglass, over $650M in leveraged positions have been wiped out in the last 24 hours. 

Crypto markets may yet see more liquidations, with today’s FOMC meeting expected to bring further volatility, despite forecasts predicting an 88% chance of 25bps rate hikes.

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