Crypto's Regulatory Stumbles Continue Amid Congressional Gridlock

Crypto's regulatory struggles continue, with the failure of the Digital Asset Market Clarity Act, also known as the Clarity Act, a bill that aimed to establish a framework for market structure. The bill, which would have sorted crypto tokens into legal categories, licensed trading firms, and determined supervisory authority between the Securities and Exchange Commission and the Commodity Futures Trading Commission, was 635 pages long and had broad coalition support from Wall Street and the crypto industry. Despite coming close to passing, the bill was held up by ethics concerns, specifically the risk of conflicts of interest at the highest levels of government. The bill's defeat means that progress will effectively reset when the new Congress is sworn in, as key senators who quarterbacked the bill will not be on the ballot again. The failure is seen as a setback for crypto's potential to expand financial inclusion and reduce the costs of cross-border payments.

The Token Taxonomy Act of 2018 was an earlier attempt at regulatory clarity, and successive attempts across four Congresses have all faltered. The Clarity Act's defeat raises questions about fairness, as many developed economies have established regulatory perimeters for crypto. The next Congress must finish what its predecessors did not, and establish a framework for the crypto industry to operate within.