CLARITY Act Stalled, but Wall Street Keeps Building on Crypto

Key Insights

• The Senate CLARITY act setback has not stopped U.S. digital asset progress.
• U.S. regulators, banks and asset managers are advancing tokenized stocks, funds and Treasuries.
• Britain’s tokenization push adds weight to a broader shift toward blockchain-based financial markets.

While the CLARITY Act languished in the Senate on Sept. 15, the financial industry did not stop its development around cryptocurrencies. The proposed law failed to gain the support of the majority in a 49-50 procedural vote and therefore did not receive the 60 votes needed to invoke cloture.

Perhaps more interesting are the developments that took place in the three weeks since. Stablecoins continued to attract institutional interest, tokenization continued to permeate financial infrastructure, and executives with direct experience on the front lines of the industry increasingly framed blockchain adoption as already underway rather than a process still awaiting congressional approval.

Joseph Chalom, CEO of SharpLInk, made the latter case in a CNBC interview published Oct. 5, stating the CLARITY Act may not have moved, but stablecoin use cases and tokenization adoption had found a path forward regardless.

CLARITY Act Loses Steam, but Not Crypto

The Senate setback was a major disappointment for the proponents of the bill. H.R. 3633, the Digital Asset Market Clarity Act, failed to overcome a procedural hurdle in the Senate. Only 49 senators voted for cloture, while 50 voted against, according to the Senate’s official records.

But the stalled vote does not erase the progress already made around digital assets. Block Insider highlighted this development before the vote, noting in its report on U.S. stablecoin legislation that Zach Pandl, Grayscale’s head of research, argued that greater clarity was already emerging through stablecoin rules, token-issuance guidance, tokenized securities, and regulated perpetual futures, even without a new law.

That assessment appears more relevant than ever in light of the recent developments.

Stablecoins Are Thriving Without Washington

The most obvious example of that trend is stablecoins. The category has expanded beyond its roots as a crypto trading vehicle, with SharpLink's Joseph Chalom recently noting that tokenized stablecoins were "potentially a payments/settlement layer—remittance, corporate treasury, payments."

His view is one that Wall Street can productize this now without a specific piece of legislation enabling it, a fact that is becoming increasingly relevant as banks and corporations attempt to transform their financial infrastructure.

Tokenization May Be Further Ahead

One of the clearest examples is the SEC’s growing engagement with tokenized securities. In January, the regulator issued a statement addressing tokenized securities and their treatment under federal securities laws.

The SEC said tokenized securities remain securities and identified different models for bringing traditional financial instruments onto blockchain networks. On Sept. 17, the SEC gave conditional approval for exempt treatment of certain tokenized National Market System stocks for purposes of trading on specific Tokenized Securities Venues.

The exemption permits qualified venues to utilize permissioned automated market makers and liquidity pools while the SEC works on establishing more permanent onchain securities market regulations.

The importance of this action lies not in the fact that the SEC has permanently changed securities laws but rather that it has utilized its existing authority to facilitate the emergence of a controlled environment for tokenized US equities trading onchain.

SEC Chairman Paul Atkins noted that the action was a step towards ushering the US capital markets into the digital age. Commissioner Mark Uyeda pointed out that by embracing tokenization, the SEC was capitalizing on an opportunity to modernize issuance, trading, settlement, transfer, and recordkeeping while at the same time cutting costs and enhancing efficiencies.

Wall Street is Bringing Funds Onchain

Indeed, the scale of the effort appears considerable, with RWA.xyz data cited by Block Insider putting SharpLink ahead with about $38.13 billion, with more than 1.3 million holders and more than 200 tokenization platforms.

Securitize ranked first among the tracked platforms with about $4.98 billion in RWA value, followed by Ondo with $3.60 billion and Circle at $3.01 billion, and the tokenized U.S. Treasury funds comprising approximately $16.2 billion.

Beyond these figures, Block Insider has also reported that Securitize has products spanning BlackRock's BUIDL as well as tokenized credit and alternative investment products. The CLARITY Act will matter for a lasting federal law that creates a stable regulatory environment, but institutions don't need such a law to pursue innovation.

The U.S. made progress on crypto infrastructure notwithstanding the setback for the CLARITY Act, pointing specifically to tokenized U.S. stocks, increased SEC and CFTC activity, stablecoins and institutional infrastructure developments.

That doesn't make the legislation any less valuable. After all, a law and agency rule aren't equal. Block Insider itself has noted the latter can be dismantled by successive presidential administrations while the former enjoys a much greater degree of permanence.

Accordingly, CLARITY and similar statutes remain relevant. But crypto's institutional infrastructure build-out has apparently achieved sufficient scale that it no longer fits neatly inside a single legislative proposal from a specific committee.