In brief
- The Senate's inability to progress the Clarity Act has shifted the responsibility of crypto regulation from Congress to federal agencies for the foreseeable future.
- In just 48 hours, the SEC introduced an exemption for tokenized stock innovations, the CFTC provided no-action relief and initiated rulemaking, while the Federal Reserve proposed new stablecoin reserve and capital regulations under the GENIUS Act.
- While industry leaders now see the regulatory route as "more viable," they acknowledge that agency rules can be slower to implement, more susceptible to legal challenges, and easier for future administrations to overturn compared to laws passed by Congress.
For nearly two years, the crypto sector's strategy in Washington hinged on a single goal: achieving clarity in regulations.
The prevailing thought was that if a comprehensive market-structure law could be enacted, it would pave the way for further developments. However, this approach encountered significant obstacles, prompting a shift in focus from Congress to federal regulatory bodies.
Myriad: Will Congress pass the Clarity Act? Click to make your prediction.Recently, the Senate failed to advance the Clarity Act, a comprehensive bill that had been in development for over a year, with a procedural vote ending at 49-50, falling short of the 60 votes required. The bill faced opposition from Democrats, with three Republicans also voting against it, as negotiations stalled over ethics concerns linked to President Donald Trump's crypto activities. Senator Cynthia Lummis, the bill's lead sponsor, deemed the effort essentially dead for the year.
Despite the setback for the bill, regulatory action quickly ensued. Within 48 hours, federal agencies stepped in to take charge of the regulatory landscape.
The SEC was the first to make a significant move, with Chairman Paul Atkins addressing the Clarity Act's failure while unveiling a new "innovation exemption" for digital assets. This framework allows qualifying platforms to facilitate the trading of tokenized U.S. stocks on-chain without needing to register as national securities exchanges, signaling the agency's intention to establish crypto policies independently of Congress.
The CFTC also made strides in parallel, issuing a no-action letter that permits passive software providers, such as crypto wallet applications, to offer users access to regulated derivatives without having to register as introducing brokers. Additionally, the agency has forwarded a broader regulatory proposal for the crypto markets to the White House, although the details have not been publicly released yet.
Next, the Federal Reserve proposed rules on Thursday that will require stablecoin issuers under its jurisdiction to back their tokens fully with safe, liquid assets and maintain capital against operational risks. This initiative is part of the multi-agency rollout of the GENIUS Act, the stablecoin legislation signed into law by President Trump in 2025. The Office of the Comptroller of the Currency (OCC) is also racing to finalize stablecoin regulations by November to meet a statutory deadline in January.
The outcome is a regulatory framework being constructed incrementally rather than through a singular piece of legislation. Industry leaders have largely accepted this new reality.
Kristin Smith, President of the Solana Policy Institute, commented that the sector is "now looking to regulators for guidance," describing this as "the more viable path forward right now."
However, it is important to note that agency rulemaking tends to be slower, more vulnerable to legal challenges, and easier for future administrations to rescind compared to formal legislation.
Not long ago, the SEC, under Gary Gensler, was seen as the primary adversary of the crypto industry. During the Biden administration, the agency's aggressive enforcement tactics created a climate of anxiety among crypto executives. The goal of establishing a market structure law was to ensure such enforcement actions wouldn't resurface.
Currently, the industry must adapt to the regulatory environment as it stands. For the time being, it is receiving guidance from agencies that were previously viewed as antagonistic, rather than from a Congress that many considered to be more sympathetic to the industry.
The future of these regulations will be a critical narrative in the coming months and possibly years.