Clarity Act failure may hamper U.S. crypto as industry seeks legal clarity elsewhere

The U.S. Senate’s failure to advance the Clarity Act on Tuesday leaves the crypto industry in the world’s largest economy without an overarching federal framework and with the roles of the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) shrouded in ambiguity.

The absence of legal certainty matters. The immediate reaction hit U.S.-focused crypto infrastructure providers, with publicly traded firms like crypto exchange Coinbase Global COIN$167.97 and stablecoin issuer Circle Internet CRCL$82.61 sliding 10% in the aftermath of the vote.

U.S. retail investors lose access to a clear, regulated market. U.S. institutions lose the certainty they need to commit capital at scale. The country as a whole loses ground in what is increasingly a jurisdictional race to become the world’s crypto hub.

“The practical reality is that capital and talent move toward environments where the rules are clearest,” said Lin Han, CEO and founder of crypto exchange Gate.

Han, whose crypto exchange focuses primarily on Asia and is ranked fifth on CoinGecko, said the short-term winners are likely to be digital asset service providers with licenses in overseas regulated markets. Even so, the U.S. limbo is not good for the industry overall, regardless of where crypto service providers are based, he said.

The Senate impasse leaves the U.S. and U.K., whose full rules don’t come into effect until next year, among the few major global financial hubs without clear rules for the industry. The European Union adopted its Markets in Crypto Asset (MiCA) regulations, which came into full effect in July, in 2023, and Asian markets are advancing their digital asset frameworks.

“The true losers are the American public and the domestic tech ecosystem,” said Stefan Muehlbauer, head of U.S. government affairs at blockchain security firm CertiK. The winners are overseas crypto hubs, grey-market operators and international jurisdictions like Asia and Europe that are rapidly expanding their market share under clear, established rules, he said.

While the SEC and CFTC can promulgate their own rules — as seen Thursday when the SEC published its “innovation exemption” for tokenized securities trading — giving U.S. companies a path forward, that is no substitute for legislation, Muehlbauer said. Clear legislation is likely to matter most to firms weighing investment, product introductions and compliance costs over several years.

Gracy Chen, CEO of exchange Bitget, took a more cautious view of whether the vote will move market activity to Asia.

“I wouldn’t look at it as volume suddenly moving from the U.S. to Asia because of one vote,” she said. “Crypto is inherently a global market, and traders will continue to go where they can find the products, liquidity and access they need.”

The vote extends uncertainty around U.S. market structure and the treatment of digital assets, Chen said. But Bitget’s plans to enter the country with the appropriate licenses and structure do not depend on the bill passing, she added.

For Matt Hougan, chief investment officer at Bitwise Asset Management, the failed vote is more of a speed bump than a roadblock.

“It would have been better if it had passed,” Hougan said. “With it failing, I think the road ahead is bumpier. But the trend is still good, and I don’t think it’s changed too much from where it was Monday, before the vote.” He said that there are still two and a half years left in President Donald Trump’s pro-crypto administration, and a lot can still happen.

Hougan said he does not expect the result to stop investors from considering smaller digital assets with strong token economics and links to real-world assets.

Tom Farley, CEO of CoinDesk owner Bullish, also said the bill’s failure is not an insurmountable hurdle.

“Durable legislation would give the digital asset industry greater certainty. But even with legislation, the real work of implementation happens at the agencies, and agencies can move faster,” he said in a post on X. SEC and CFTC rulemaking may prove more consequential in the near term for tokenized securities, including how issuers, transfer agents and issuer-sponsored tokens are treated, he said.

Nilmini Rubin, chief policy officer at Hedera, said the vote does not end the legislative effort. “We’ve seen policymakers put real time and effort into studying the underlying technology, which is a positive step in the right direction,” she said. “I think most of the industry is still as ambitious as ever that we’ll get to where we need to be.”

Still, Rubin said, U.S. competitiveness remains at risk as long as the market lacks clear rules.

“The largest loser is U.S. competitiveness because uncertainty pushes innovation and adoption in the U.S. behind other countries,” she said. “The longer the market lacks clear rules, the more difficult it is to ensure the United States remains at the center of this system, rather than on the margins of it.”

She said stablecoins, tokenization and cross-border payments will continue to grow regardless of the vote, while U.S. consumers will be harder to protect without a statutory framework.

But there’s light at the end of the tunnel in the U.S. Many digital assets executives say the SEC and the CFTC will deliver on their pledge to lay out the rules.

Or as U.S. lawyer Richard B. Levin, chair of FinTech and regulation at Taft Stettinius & Hollister LLP, put it during a panel discussion at the 2026 European Blockchain Convention in Barcelona:

“You can count on Americans to do it absolutely wrong until they finally get it right.”