The Daily: Clarity Act's Senate defeat is 'nothing truly structural' for crypto markets, and more

The following article is adapted from The Block’s newsletter, The Daily, which comes out on weekday afternoons.

Happy Wednesday! The Clarity Act's Senate defeat is "nothing truly structural" for crypto markets, analysts said, with interest rates likely to matter more for bitcoin's next move as the Fed hikes 25 bps.

In today's newsletter, the crypto industry reacts after the Clarity Act's procedural vote fails, Bernstein expects "swift" SEC and CFTC rulemaking, Circle launches Arc on public mainnet, and more.

Meanwhile, the House Ways and Means Committee voted to advance cryptocurrency tax legislation.

P.S. Don't forget to catch The Starting Block live at day one of the Avalanche Summit in New York!

'This one stings': Clarity Act fails procedural Senate vote — is crypto's biggest regulatory push dead?

The Senate voted 49-50 against advancing the Clarity Act on Tuesday, sinking the crypto bill in a procedural defeat that drew "no" votes from both parties.

• Key Democratic negotiators said they blocked it over unresolved ethics concerns tied to President Trump's crypto wealth, with several accusing Republican leadership of shutting down talks at the last minute.
• Lead Republican author Sen. Cynthia Lummis hit back hard, accusing Democrats of never being serious and calling the party "anti-American," while Ripple CEO Brad Garlinghouse said "this one stings."
• White House crypto advisor Patrick Witt called the failure a "major disappointment," warning it risks ceding future rulemaking to Brussels or Beijing.
• Sen. Thom Tillis, who switched his initial yes vote to no, filed a motion to reconsider that leaves room for another cloture vote within days, though one Republican aide told The Block that they think the bill is dead.
• Industry figures noted regulators like the SEC and CFTC can still fill the gaps, and pointed to last year's GENIUS Act stablecoin bill, which failed a procedural vote before eventually becoming law.

Bernstein says Clarity Act failure allows stablecoin rewards on idle balances to continue, expects 'swift' SEC and CFTC rulemaking

Analysts at Bernstein said the Clarity Act's failure shifts crypto rulemaking to the SEC and CFTC, which it expects to take an "aggressive and swift" approach to make up for the lost legislative time.

• The analysts see the agencies tackling token classification, DeFi and self-custody protections, equity tokenization, and faster approvals for real-world-asset perpetuals, plus event-contract rules.
• Following the failed cloture vote, the stablecoin-rewards status quo remains, allowing platforms like Coinbase to continue offering rewards on idle balances.
• "Stablecoins should be just fine since they are governed by GENIUS," the analysts wrote.
• Meanwhile, StoneX called the bill dead for this Congress with just 14 Senate working days left before the campaign season, noting Polymarket's 2026-passage odds had already collapsed from 82% in February to 16% before the vote.
• JPMorgan struck a slightly more positive note, calling the bill "not fully dead" given Tillis's motion to reconsider, but said the window to pass it this year is "extremely narrow and only getting narrower."

Circle launches Arc mainnet with BlackRock and Visa among validators, mints 10 billion ARC tokens

Circle opened the public mainnet of its Arc Layer 1 blockchain, with Aave, Morpho, and Uniswap among more than 100 apps live from day one.

• CEO Jeremy Allaire called Arc the most significant launch in Circle's history since USDC, pitching it as always-on infrastructure for the onchain and agentic economy.
• Founding validators include heavyweights like BlackRock, Visa, Mastercard, DTCC, and ICE, which will join in phases, with Circle and DTCC also planning to tokenize DTC-custodied assets on Arc from late 2027.
• Circle confirmed it minted 10 billion ARC governance tokens this week but called it a technical milestone rather than a commitment to a public launch, with USDC remaining the network's fee currency.

Deutsche Bank plans bitcoin, ether custody for institutional clients in Europe

Deutsche Bank said it plans to launch digital asset custody for European corporate and institutional clients this year, pending regulatory clearance.

• The service will initially cover bitcoin, ether, and stablecoins including USDC, EURC, and EURAU, with the bank handling clients' wallets and private keys.
• The 156-year-old German lender has been developing the offering for years, partnering with Taurus and Bitpanda on the project, and will target corporates, asset managers, hedge funds, brokers, and sovereign institutions.
• Deutsche Bank framed digital assets as a complement to traditional finance rather than a replacement, and said it may expand supported assets and add tokenized financial instruments over time.

Aave founder pitches 'Uber path' for DeFi after Clarity Act fails Senate vote

Speaking to The Starting Block at Avalanche Summit, Aave founder Stani Kulechov said DeFi may need an "Uber path" to regulation, growing adoption until lawmakers can no longer avoid tackling how to regulate it.

• Kulechov said he's still "very hopeful" Clarity can pass this year, but is focused on Aave's next growth phase, pushing DeFi further into tokenized stocks, securities, and other real-world assets.
• He argued tokenization and DeFi are now "a go-to-market challenge" rather than a technological one, and teased a consumer app that abstracts away wallet and network complexity.

In the next 24 hours

• The Bank of England's latest interest rate decision is due at 7 a.m. ET on Thursday, with economists forecasting no change. U.S. jobless claims data follows at 8:30 a.m.
• Aerodrome Finance and ZKsync are among the crypto projects set for token unlocks.
• UN Blockchain Week, the European Blockchain Convention, and Avalanche Summit continue. CBC Summit and ETHSpain get underway.

Reader poll

The Crypto Fear & Greed Index just dropped from 69 to 51 in a day. Is the rally officially over?

YES, MOMENTUM'S GONE

NO, JUST A DIP

One click records your pick. We'll share the result in a later edition.

*74% of respondents in last Wednesday's poll agreed that non-dollar stablecoins will eventually catch on.

Never miss a beat with The Block's daily digest of the most influential events happening across the digital asset ecosystem.