Crypto Market Surges as CLARITY Act Fails to Advance in US Senate

After the CLARITY Act failed to advance in the US Senate, the crypto market reacted positively. Bitcoin surged 8% and Ethereum gained 7% according to Bitwise data as of September 30. The firm's CIO, Matt Hougan, attributed the move to faster action by US regulators. According to Hougan, the industry lost some long-term legislative certainty, but gained a series of decisions that proved less restrictive than the provisions in the bill under discussion.

Hougan highlighted several areas that benefited from the CLARITY Act being halted. One of them was stablecoins. The final version of the initiative would have barred platforms from paying interest or yield on such assets. However, Hougan noted that the current sector-specific bill, GENIUS, prohibits such payments directly by issuers, but does not impose a similar federal restriction on crypto exchanges. Coinbase, which offers users rewards for holding stablecoins, is a potential beneficiary.

The regulation of trading platforms was also affected. The CLARITY Act aimed to create a federal licensing regime for spot crypto exchanges, making it easier for large traditional finance firms to enter the market. However, the current model for Coinbase, Kraken, and other players remains in place for now.

The most notable changes came in tokenization. Two days after the vote, the US Securities and Exchange Commission (SEC) approved limited onchain trading of tokenized US equities. The regulator granted certain venues a temporary conditional exemption for five years, allowing them to use automated market makers and liquidity pools, provided they meet the established requirements.