CLARITY fell. And the story behind the fall is one you won’t want to miss.
Today, in $BTC it fell more than 4% intraday, and Coinbase and Circle were around 9% declines. What was the regulatory trigger? The U.S. Senate failed to get the 60 votes needed to move forward with the CLARITY Act: the vote ended 49–50.
And now the story
Republicans had been negotiating for more than a year and say they have incorporated 126 changes requested by Democrats. On Sunday, they published what they effectively presented as their final text.
And yet, last night they were still negotiating.
The big elephant in the room? 🐘
Trump and his own crypto business.
The Democrats wanted much tougher conflict-of-interest rules to prevent a president from economically benefiting from digital assets while in office. Trump ended up accepting new concessions, including greater authority for state attorneys general, but the Democrats sent a counterproposal late Monday night: they wanted stronger enforcement and, under certain conditions, mandatory divestment of the president’s crypto assets.
There was no agreement. And that’s when the drama really kicked up.
Before the vote, Cynthia Lummis even said it was basically “now or never.”
Thom Tillis, one of the Republicans who had negotiated the ethical provisions with the Democrat Ruben Gallego, said they were incredibly close.
Hours later, a surprise 49–50.
It didn’t even go through the procedure needed to formally begin debating the law.
And CLARITY wasn’t just any law.
It was trying to answer questions the industry has been asking itself for years:
When is a token a security and when is it a commodity?
Who calls the shots: the SEC or the CFTC?
How do exchanges and intermediaries operate?
What protection do certain DeFi developers have?
How far can stablecoin rewards go?
That last point has its own gossip: banks vs. crypto.
Banks have been warning that allowing rewards on stablecoins could pull deposits out of the traditional banking system. Crypto companies argue that restricting them protects banks at the expense of innovation.
The latest CLARITY even included a “circuit breaker” so Treasury could step in in case of a deposit outflow tied to payment stablecoins.
And now what?
1. GENIUS didn’t fall.
The stablecoin framework approved last year is still on track. What just got jammed is the broader crypto market’s regulatory structure.
2. I wouldn’t assume CLARITY is dead.
but Reuters considers it effectively frozen, with few chances of reviving in the short term.
3. You have to look at the SEC and the CFTC almost as much as you look at Congress.
Even Brian Armstrong has said that, if CLARITY doesn’t pass, both agencies can continue moving forward via rulemaking. In other words: regulation doesn’t disappear; it can change vehicles.
4. If you work with stablecoins, watch the fight between banks and stablecoin yield.
That discussion looks technical, but in reality it determines who captures the deposit, the yield, and ultimately the financial relationship with the user.
5. And I wouldn’t attribute all of Bitcoin’s drop to Washington.
Today we also have oil around USD 103, high yields, and a Fed decision on top of that. CLARITY added regulatory uncertainty to a market that already had enough macro uncertainty.
The irony is great:
Washington managed to agree on how to regulate the onchain dollar with GENIUS.
But when the time came to decide who controls the rest of the onchain market, banks appeared, crypto companies appeared, the SEC, the CFTC, DeFi, stablecoin yields, Trump, his own crypto businesses, and an election just a few weeks away.
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