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Bitwise's Matt Hougan argues the Clarity Act's Senate failure gave crypto better rules
Bitwise CIO Matt Hougan says the Senate's Sept. 15 failure to advance the Clarity Act helped crypto, citing Bitcoin's roughly 8% gain since the vote. Half of his case is the status quo outliving the bill, and the rest is SEC relief that future regulators can change.
The Investor · Invest desk
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What happened
- The procedural vote fell short of the 60 votes required, stalling the crypto market structure bill ahead of the midterm elections.
- Negotiators had used the bill to target a GENIUS Act gap that bans issuers from paying stablecoin yield but sets no explicit limit on rewards paid by exchanges.
- Two days after the vote, the SEC approved a five-year conditional exemption for venues trading tokenized US-listed stocks through permissioned liquidity pools.
- On Sept. 25, SEC staff said announcing a buyback for a non-security token on a functional network does not by itself signal managerial efforts under Howey.
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Why it matters
- cost Banks lose the curb on exchange-paid stablecoin rewards they wanted for deposit competition, and platforms like Coinbase keep using rewards to win customers without restructuring them.
- constraint New exchange entrants still have to assemble the state licenses incumbents already hold, because the federal market structure that might have lowered that barrier is stalled.
- exposure Protocols running token buybacks now base their Howey position on guidance without legal force, so their footing moves whenever future regulators change their view.
Hougan's memo credits the rally to four areas. More precisely, it credits two things Congress failed to do and two things the SEC did [4]. The first pair is the status quo. Negotiators went after exchange-paid stablecoin rewards because banks worried about competition for deposits [3]. With the bill stalled, Hougan argues, Coinbase and other platforms that use those rewards to attract customers come out ahead [4]. Established exchanges also keep the advantages of the state licenses and infrastructure they already hold. A federal market structure could have eroded those advantages for new competitors [5].
The second pair is new. The tokenization exemption covers more than the venue. Certain liquidity providers also received conditional relief from dealer registration [6], so some of the firms supplying the pools' liquidity get relief alongside the venues (on conditions, for five years). Hougan argues that trading under the exemption now is worth more to tokenization firms than waiting years for the studies and rulemaking the legislation contemplated [7]. The buyback clarification came ten days after the vote [2]. It is staff guidance and does not have the force of law [9].
By Hougan's count, Bitcoin is up roughly 8% and Ether 7% since the vote, while NEAR, Uniswap and Avalanche posted substantially larger gains [2]. Hougan names three protocols the buyback guidance helps: Hyperliquid, NEAR and Uniswap [10]. So two of the three biggest movers he cites are tied to the only item on his list that is staff guidance [3].
Hougan acknowledged that future regulators can change agency interpretations and exemptions, while legislation is harder for a later administration to reverse [11]. JPMorgan analysts said the same after the vote, adding that courts can challenge rules made by the SEC and CFTC [12]. "Crypto sacrificed long-term certainty and got better rules, faster," Hougan wrote [14]. His defence is that growing adoption by major financial institutions could make a broad reversal harder over time [13].
The rally can be read three ways. Hougan's reading is that institutions build on the relief until a broad reversal becomes impractical [13]. The JPMorgan reading is that the relief lasts only as long as future administrations and the courts allow [12]. A third is that the 8% captures everything that moved Bitcoin after Sept. 15, and the memo, as reported, does not separate the vote from other drivers [2]. I think Hougan is right that the near-term rules are friendlier. Those gains depend on two conditions, though. The status-quo half holds while Congress stays stalled [1], and the agency half holds until future regulators decide otherwise [11]. I would be wrong if NEAR and Uniswap kept their lead over Bitcoin through a challenge to the Sept. 25 guidance [2][8].
What to watch
- Whether the SEC turns the Sept. 25 buyback guidance into a rule with legal force, or staff revise or withdraw it.
- How many venues and liquidity providers start trading tokenized US-listed stocks under the five-year exemption, the institutional uptake Hougan says will make reversal hard.
- Whether a market structure bill returns after the midterms with exchange-paid stablecoin rewards back in the text.