Grayscale: CLARITY Act unlikely to cross the finish line this year

The chances of the CLARITY Act clearing the US Senate this year are slim. That is according to Zach Pandl, head of research at Grayscale. Election-year politics and a crowded Senate agenda do not make it any easier. Still, Pandl argues that the crypto sector can simply carry on without this law.

In brief:

• Grayscale expects the CLARITY Act will not be passed this year due to the Senate agenda and election-year politics.
• The absence of the law has no direct impact on Bitcoin, major blockchains or the growth of stablecoin payments.
• Without clear legislation, there is a risk that new investments and developer activity will shift abroad.

No law, but no crisis either

Pandl explains that the CLARITY Act not being passed has no immediate consequences for how major blockchains operate. Nor does it change demand for Bitcoin as a store of value or the rise of stablecoin payments. After all, the crypto sector has been operating for almost 17 years without a comprehensive legal framework in the US.

What the law would have offered, however, is a broad regulatory framework for digital assets, including rules for market participants, protection for consumers and investors, and a path for the development of tokenized securities markets. Pandl calls the absence of that legislation a missed opportunity.

SEC fills the gap with its own rules

Meanwhile, the SEC is pressing ahead with drafting its own rules, particularly around tokenized securities. Pandl expects the SEC and other regulators to take further steps in the coming months through so-called rulemaking. Under the current administration, steps have already been taken in the areas of institutional custody of crypto, banking services for the sector, staking and crypto ETPs.

Pandl regards the interpretive guidance that the SEC previously published on the application of federal securities law to crypto as a major step forward. But without overarching legislation, uncertainty persists, and in his view that uncertainty could lead to new investments and developer activity increasingly taking place outside the US.