Author: David Christopher

Translation: 深潮 TechFlow

Deep Tide Insights: The CLARITY bill failed in the Senate with a vote of 49 to 50, far from the required threshold of 60 votes. This is not the end for crypto: the CFTC and SEC will continue to push for regulatory implementation, but a comprehensive legislative framework that is difficult to overturn is unlikely to be seen in the short term. The timeline for regulatory certainty for long-term investors is once again blurred.

The latest and most anticipated vote on CLARITY failed early this morning.

It is important to clarify that this vote was not aimed at passing CLARITY in the Senate. It was merely to determine whether the senators were ready to move this bill out of months of negotiation and formally bring it to the Senate floor for consideration.

The result was 49 votes to 50, a long way from the required 60. It seems they are not ready yet.

Getting to This Point

This long-stalled bill had revived hope over the weekend, making today's disappointment particularly painful.

On Sunday night, Republicans unveiled what they called the final draft of CLARITY, incorporating over 100 substantive amendments proposed by Democrats. The most noteworthy was a much tougher ethical rules proposal, which President Trump had already agreed to. This was originally intended to address one of the biggest obstacles for Democratic support.

Under the new rules, "restricted" officials, including the president, vice president, members of Congress, federal judges, other high-ranking officials, and their spouses, would be prohibited from issuing or promoting digital assets. However, the children of restricted officials are not subject to this limitation. They are also prohibited from holding more than $15,000 in equity in a company whose primary income derives from issuing or "sponsoring" digital assets.

For officials like Trump, who have already engaged in such business interests, they would either have to sell their shares or transfer them into a qualified blind trust (i.e., a trust managed by independent trustees).

Additionally, an important part of these ethical constraints is that they empower state attorneys general to enforce the rules. This addressed Democratic concerns that otherwise the enforcement power might mainly rest in Trump’s own Justice Department, which would not lift a finger against him.

These amendments seemed to finally have a chance of gathering enough votes.

Agreement Falls Apart

But by Monday night, Democrats came back with a counter-proposal, demanding stricter ethical constraints.

The full proposal has not been made public, but reports indicate that Democrats want to expand the rules to more directly encompass the children of officials and require those public officials holding substantial interests in crypto companies to actually liquidate their assets, rather than simply transferring them into trusts. Concerns also remain regarding whether the enforcement mechanism would still allow the president to have too much leverage over the actions of state attorneys general.

Republicans vehemently rejected this counter-proposal on Tuesday morning. A spokesperson for Senator Cynthia Lummis stated that the proposal "looks exactly like the Democratic position from a few weeks ago." Democrats countered that they have been pushing these terms for most of the past year.

By this time, the optimism surrounding the bill's passage had begun to leak away. However, for the market, it wasn't until CLARITY truly failed to vote that Bitcoin experienced a drop: at one point plunging 4%, briefly falling below $75,000, before starting to recover.

What Happens Next?

Specifically regarding CLARITY, the path ahead is unclear.

Technically, the bill is not dead yet. Lawmakers can return to the negotiating table, make further concessions, and attempt another vote. However, reports suggest that Republicans seem quite fatigued, and Democrats do not appear willing to yield. On top of that, the calendar is now very unfavorable for them: Congress is preparing to leave Washington before the November midterm elections.

It is possible to push again after the elections, or if lawmakers unexpectedly reach an agreement before that, they might try again. However, today's failure has greatly reduced the likelihood of CLARITY becoming a major legislative priority again this autumn.

Nonetheless, importantly, the rule-making for crypto itself will not stop.

The CFTC and SEC will continue to exercise their existing powers to create rules and clarify how existing commodities and securities laws apply to crypto assets as much as they can. The limitation lies in permanence. These agencies can still make an impact, but they cannot replicate the certainty that a comprehensive law like CLARITY could bring, and these rules could also be overturned or rewritten by future administrations. That said, I still expect the "mainstreaming" of crypto to continue, even if the process becomes chaotic again.

However, to engrave this mainstreaming in stone, having a more reversal-resistant framework seems like we will just have to keep waiting. Until when, no one knows.