Brief
The Senate was unable to advance the Clarity Act, shifting the responsibility for formulating encryption regulations from Congress to regulatory agencies, and it is very likely that this will remain the case in the foreseeable future.
Within 48 hours, SEC announced an exemption for tokenized stock innovation, CFTC issued a statement indicating that no law enforcement action would be taken, and submitted a rule-making proposal to the White House. Meanwhile, the Federal Reserve proposed stablecoin reserve and capital rules in accordance with GENIUS Act.
Industry insiders say that this regulatory approach is currently “more feasible,” but the formulation of institutional rules is slower and such rules are more likely to be challenged in court. They are also more susceptible to being overturned by future governments than legal regulations.
In the past two years, the strategy of the crypto industry in Washington has almost revolved around one word: clarity.
The industry's thinking is that once a market structure law is passed, all other issues will be resolved accordingly. However, this strategy has encountered obstacles, and now the focus of the industry has shifted from Congress to federal regulatory agencies.
Last week, the Senate was unable to advance the Clarity Act bill – a market structure bill that had been in the works for over a year and covered a wide range of topics. The bill failed to pass with 49 votes in favor and 50 against in a procedural vote, falling far short of the required 60 votes. Democrats voted against it, and three additional Republicans joined the opposition camp, following the breakdown of negotiations on ethical provisions related to President Donald Trump's crypto business in the preceding months. Cynthia Lummis, the main architect of the bill and a senator herself, stated that this year's efforts are almost "non-existent" in reality.
However, the bankruptcy of the bill did not stop the rule-making process; instead, it directed it in another direction. Within 48 hours, federal regulatory agencies began to fill this gap on their own.
SEC took the lead and was the most prominent in action. When Chairman Paul Atkins proposed a new digital asset "innovation exemption," he directly mentioned the failure of Clarity Act. This framework allowed eligible platforms to trade tokenized U.S. stocks on the blockchain without having to register as a national securities exchange. This is the clearest signal so far that the institution intends to formulate crypto policies based on its own authority, rather than waiting for legislators to do so.
CFTC is also making progress in this regard. Staff from this institution have issued a stance against taking enforcement action, allowing passive software providers—including cryptocurrency wallet applications—to enable users to access regulated derivatives without registering as introducing brokers. The institution has also submitted a broader set of crypto market regulations for review by the White House, although the relevant text has not yet been made public.
Next came the Federal Reserve. On Thursday, this central bank proposed rules that require issuers of stablecoins under its supervision to provide full support for their tokens with safe and highly liquid assets, and to hold capital to cover operational risks. This is part of its involvement in the multi-agency implementation of the GENIUS Act; a stablecoin law signed by U.S. President Donald Trump in 2025. The implementation efforts also include the Office of the Comptroller of the Currency (OCC), which is working to finalize its own stablecoin rules ahead of the January deadline, with a goal of completion by November.
As a result, it is a regulatory framework built up from various rules, rather than a single law passed by Congress alone. Industry insiders have generally come to accept this fact.
Solana Policy Institute President Christine Smith stated that the industry "is now turning to regulatory authorities for guidance" and called this "the more feasible path forward for now."
The problem is that the formulation and drafting of institutional rules are slower, making them more susceptible to challenges in court and also more likely to be overturned by future governments.
After all, not that much time has passed: back then, SEC led by Gary Gensler was once the most hated "villain" in the crypto industry. During the administration of Joe Biden, this agency implemented a policy of "regulation through law enforcement," which sent shivers down the spines of every crypto executive. The Market Structure Act was originally intended to prevent such days from happening again.
But for now, the industry can only accept what it can get. At present, what it receives are the “rules of the road” set by regulatory agencies that were previously hostile, rather than perhaps the Congress, which could be the most supportive of the industry.
Whether these rules will remain effective in the long term is a story that will unfold over the coming months and even years to come.
