On Tuesday September 15 the entire crypto world waited anxiously for the result of the Clarity Act’s “cloture” vote. Some explanation here — the bill itself seeks to provide certainty around the federal rules and regulations for crypto trading. Banks and other big financial institutions had been hesitant to act on crypto product development and to service market opportunities until they knew exactly what the legal terms of engagement were. So this bill had been under development by multiple stakeholders for well over a year.
“Cloture” is one of the wonky procedural words which essentially means: it’s time to stop debating, let’s move this thing to a vote. It didn’t even get close — they needed 60 votes and got 49. This after tens of millions of dollars were poured into pro-cloture lobbying by the well-heeled crypto industry.
There were a few reasons for defeat, mainly along partisan lines. But probably none was more glaring than the Trump family’s profitable forays into crypto ventures, which critics regard as serious conflicts of interest. Without that one visible and ugly albatross around the industry’s neck, it probably would have moved to a vote, and it might well have passed. As it became clear that the yes vote was going south, crypto prices started to crash. Bitcoin fell about 4% to around $75,600, and other crypto-proximal assets fell further — some by more than 10%.
Despair was darkly draped over crypto Twitter all of Tuesday night.
Ha! What a difference a week makes.
Shortly after the defeat, the two agencies tasked with overseeing crypto — the Securities & Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) — started releasing new administrative rules for crypto across a wide spread of issues that the bill was supposed to clarify. In short, if Congress would not make a law, the agencies would make some rules under their own legal remit.
By this week prices were roaring again. Huzzahs filled the air. Crypto was back.
Within days bitcoin had regained its losses and pushed above $80,000. By Monday September 21 it had passed $85,000, its highest level in eight months. Other tokens rebounded, the listed exchange Coinbase (which had also crashed) bounced sharply too, and ETF outflows reversed. The market had performed an extraordinary reassessment, even in the face of the US Federal Reserve’s rate hike on September 16 — its first since 2023, and usually a crypto downer. On Tuesday the failure of Clarity was treated as a calamity. Less than a week later it appeared considerably less important.
The reason is that while Congress has failed to provide the legal framework, America’s regulators have decided to provide a set of rules themselves. Those rules, while not perfect, are enough for investors to regain confidence.
Two days after the Senate vote, SEC chair Paul Atkins announced an “Innovation Exemption” allowing qualifying platforms to trade tokenised American shares on blockchain infrastructure without registering as national securities exchanges, subject to various conditions. The exemption will run for five years. More strikingly, Atkins explicitly linked the action to what had just happened on Capitol Hill. Congress had failed to advance Clarity, he said, and “so today, the SEC is taking a significant step forward”.
At almost exactly the same time, the CFTC was doing something similar. It issued a no-action position protecting qualifying providers of “passive software” from having to register as introducing brokers merely because their software connects users with regulated derivatives markets. That technical change could matter a great deal to crypto-wallet developers and other companies providing the plumbing through which decentralised markets operate. It spares them the enforcement risk that comes with operating unregistered.
The root of the matter
More significantly still, the CFTC has sent a proposed rule titled Regulation Crypto Asset Transactions and Regulation Crypto Asset Markets to the White House Office of Management & Budget. The full details are not yet public, but CFTC chair Michael Selig had already made clear that if Congress failed to act, his agency intended to use its authority to construct as much of a crypto regulatory framework as it legally could.
And there has been even more in the past few days — supportive actions related to bitcoin futures and the heating up of action around the Trump administration’s trumpeted “Strategic Bitcoin Reserve”. The new rules are pouring out hot and fast, all of them aggressively pro-crypto in a way that the market has not seen before.
Congress didn’t act. So the agencies are acting with their set of softer tools, annoying lots of regulation hawks in the Democratic Party, such as senator Elizabeth Warren.
Does this have legs? Surely the next administration (especially if it is Democratic) can overturn those rules if it wants? The answer is yes. Kind of.
First, the Clarity Act will likely come back to Congress in the next year or two, and a law trumps an agency rule, so the rules could be upended. Second, a Democratic administration could get in and simply change the rules again. But there is also this ground truth: rules grow roots, and entire sections of the economy grow above them. Changing agency rules is painful and sometimes destructive, so the rules now being hammered in by the SEC and CFTC are likely to survive in some form, even in the face of future headwinds.
Finally, the more important shift may be philosophical rather than legislative. Under the previous regulatory regime, much American crypto policy was conducted through enforcement, under the iron fist of former SEC chair Gary Gensler. Companies frequently discovered where the supposed regulatory boundary lay only after stepping across it.
The Atkins-Selig approach is attempting to reverse that process by defining categories, exemptions and pathways before enforcement becomes necessary. Critics argue that this risks weakening investor protections, and the investor-protection group Better Markets has attacked the SEC’s Innovation Exemption on precisely those grounds. That argument will continue, as it should.
In the immediate aftermath of the Clarity Act failure, the most optimistic of pro-crypto commentators were hoping that there might be a silver lining somewhere. There now seems to be an entire silver cloud. Crypto spent years trying to persuade Congress to tell the regulators what to do. Congress failed under the sludge of divergent worldviews and partisan distrust.
The regulators have now started doing much of it anyway. Clarity, with a capital C, may be dying in the Senate. Clarity, with a small c, is arriving surprisingly quickly. And bitcoin, the grand old man of crypto, after briefly noticing the commotion in Washington, appears to have shrugged and moved on.
Steven Boykey Sidley is a professor of practice at the University of Johannesburg, a partner at Bridge Capital, and a columnist-at-large at Daily Maverick, Daily Friend and the FM. His new book, It’s Mine: How the Crypto Industry Is Redefining Ownership, is published by Maverick451 in South Africa and Legend Times Group in the UK and EU.
