CLARITY Act Passage Sparks Misplaced Optimism in Crypto Markets

The Senate's passage of the CLARITY Act has sparked excitement in the crypto market, but a closer look at the bill reveals that its impact will be slower and more complex than initially thought. Unlike other regulatory bills, which can take effect immediately, the CLARITY Act is a start-up gun, instructing two federal agencies to build the rules that will actually govern the market.

The bill contains two types of provisions: those that declare the law and those that instruct agencies to build something. The former type takes effect immediately, while the latter waits for rulemakings to be completed. For example, the ETP grandfather clause deems certain tokens non-securities by statute, eliminating classification ambiguity for these assets. However, other provisions, such as self-certification and registration regimes, will take years to implement.

The agencies responsible for implementing the $GENIUS Act have already missed a one-year deadline for issuing rules, with proposed regulations still in circulation. This suggests that the rulemaking process will be slower than expected. As a result, exchanges cannot register with a regime that has no forms, issuers cannot certify through a process with no procedures, and new products, venues, and capital-raising enabled by the bill will arrive on the agencies' calendar, not the Senate's.