Clarity Act’s failure gave crypto 'faster' regulatory wins, Bitwise CIO says

It's a paradox that has puzzled both crypto naysayers and supporters alike: Why did the crypto market rally after the Clarity Act failed to advance in the Senate?

Bitwise Chief Investment Officer Matt Hougan took a stab at making sense of it in a new memo posted on Wednesday. He argues that crypto may not have gotten the certainty of federal law, but it also dodged certain compromises that would have stifled major parts of the industry.

This led other regulators like the Securities and Exchange Commission and the Commodity Futures Trading Commission to step in with measures that he sees as more favorable than the bill itself.

The Senate rejected a move to advance Clarity on Sept. 15, with 49 senators voting in favor versus 50 against.

Many expected this to erase much of the crypto market rebound gains seen in the month prior to the vote, but the opposite happened.

Clarity down, crypto up

Bitcoin (BTC) is up nearly 11% while ether (ETH) has added roughly 12%, while other smaller tokens have posted much larger gains.

The total crypto market capitalization, meanwhile, is sitting at roughly $2.95 trillion, up nearly 11% from the $2.65 trillion on Sept. 15.

Stablecoin rewards are one example in Hougan's analysis. He noted that the final bill would have barred platforms from paying customer interest or yields on stablecoin balances. With Clarity stalled, exchanges like Coinbase are free to continue offering rewards under the existing GENIUS Act framework.

He also sees established exchanges benefiting. Clarity would have created a national licensing path that could make it easier for would-be rivals to compete, while limiting firms that combine exchange and brokerage services, he wrote.

On tokenization, the SEC issued a five-year "innovation exemption" just days after the vote, allowing limited trading of tokenized U.S. stocks through onchain platforms.

SEC staff then offered further guidance last week for projects that buy back their tokens. An updated FAQ said announcing a buyback for an already functioning crypto network would not itself make a token sale an investment contract.

The lingering risk in Hougan's memo is that a future administration could come in and change course where Congress has not locked the rules into law.

For now, however, "Crypto sacrificed long-term certainty and got better rules, faster," he wrote.