Cryptocurrency's Progress Unstoppable With or Without CLARITY Act: Bitwise
According to Matt Hougan, even without congressional passage of pivotal market structure legislation this year, the industry will continue advancing with regulatory guidance from the SEC and CFTC keeping momentum alive.
Should the CLARITY Act fail to gain passage this week, the legislation will enter what Bitwise chief investment officer Matt Hougan describes as a "walking dead" status, though this won't halt the cryptocurrency sector's continued advancement.
Hougan stated in a Wednesday blog post that despite himself and numerous others characterizing this as the "make or break" week for the CLARITY Act, the cryptocurrency sector has achieved too much advancement to be forced "back in the bottle."
"The reality is that Washington is always late to major technology shifts, and it has rarely mattered as much as people feared," said Hougan.
These remarks arrive as the Senate approaches an Aug. 5 deadline for advancing the significant crypto market structure legislation prior to its summer recess, with widespread concern that this week's failure could result in the bill being postponed until next year as legislators turn their attention to November's midterm elections.
CLARITY Act's 2026 passage prospects diminish
Growing pessimism surrounds the CLARITY Act's potential passage this year among market analysts. During July, Galaxy Research reduced its probability estimate for the CLARITY Act's 2026 passage to 30%, while Polymarket presently indicates a 23% likelihood of the legislation receiving a signature into law this year, representing a decline from February's 82%.
On July 24, NYDIG global head of research Greg Cipolaro said the latest draft was more complete but still lacked sufficient bipartisan support.
"The central investor takeaway is that Republicans have produced a substantially more complete bill, but not yet one with a credible path to 60 votes," Cipolaro said.
Per sources who spoke with Punchbowl News, Senate Democrats will withhold cloture for the cryptocurrency bill absent indications of White House progress on a bipartisan ethics agreement, along with advancement on illicit finance matters and stablecoin yield provisions.
According to Hougan, the bill's failure to pass will place it in a "walking dead" condition—stalled without being definitively defeated. He noted some possibility remains for the bill's passage in September, or potentially in December, during Congress's lame duck session.
"Congress often bundles multiple bills into a year-end 'omnibus' package, forcing legislators to vote on a single bill that includes things they like and things they hate. Maybe the Clarity Act can pass that way."
Hougan from Bitwise maintains "Crypto will be fine"
Should the CLARITY Act not pass this year, Hougan indicated the sector will revert to relying on the joint interpretation from the SEC-CFTC issued in March, which designates Bitcoin along with other assets as digital commodities while replacing the SEC's 2019 staff guidance.
SEC Chair Paul Atkins reinforced this last week, saying his agency is "ready, willing, and able to come out with rules that address the same issues as CLARITY and other aspects of the crypto market."
Nevertheless, regulations issued by these two agencies lack the permanence of congressional legislation, remaining vulnerable to court challenges or reversal under future administrations. Atkins himself recognized this reality in March upon the two agencies' interpretation release.
"Only Congress can ensure that regulation in this area is future-proofed through comprehensive market structure legislation," Atkins said.
Ryan Louvar, WisdomTree's chief legal officer, has contended that legislative absence would continue creating market impediments despite regulatory agencies' best efforts.
"A market cannot function well when its participants cannot tell in advance which agency's rules apply to them," Louvar said at a July congressional hearing.
Despite these concerns, Hougan maintained that "crypto will be fine," noting the industry would still receive two and a half years of accelerated growth opportunities before any new administration could potentially appoint a new SEC chair.
"Washington is dysfunctional. It seems crazy to me that we can't get our act together to pass legislation that would improve investor protections and spark new innovation," said Hougan.
"But it's not a referendum on crypto's validity as a pillar of the global financial infrastructure. That ship has long since sailed. At this point, crypto has enough momentum that it will reshape finance for decades, regardless of what happens in the next few days."