Crypto Market Rises 11% Despite CLARITY Act Failure, Bitwise Says Regulatory Burden Eased
Summary
- The cryptocurrency market extended its gains even after the CLARITY Act stalled, with analysis suggesting that avoiding some of the bill's regulatory burden supported sentiment.
- After the bill failed, Bitcoin (BTC) rose about 11%, Ethereum (ETH) gained about 12%, and total cryptocurrency market capitalization increased about 11%, the report said.
- The report said the bill's collapse helped the industry avoid stablecoin reward restrictions and a nationwide licensing regime, while drawing attention to agency actions such as the SEC's "innovation exemption."
Forecast Trend Report by Period
The cryptocurrency market has remained strong even after the CLARITY Act, a U.S. Senate bill on digital-asset market structure, failed to advance, with analysts arguing that avoiding some of the legislation's regulatory burdens ultimately supported sentiment.
The Block reported on October 30 that Bitwise Chief Investment Officer Matt Hougan wrote in a recent report that while the crypto industry failed to secure long-term regulatory clarity at the federal level after the bill collapsed, it also sidestepped provisions that could have limited the sector's growth.
The Senate failed to move the CLARITY Act forward in a procedural vote on September 15, with 49 votes in favor and 50 against. At the time, markets expected the bill's collapse to weigh on cryptocurrency prices, but the opposite happened. Since September 15, Bitcoin has risen about 11%, Ether about 12%, and some smaller tokens have posted even larger gains. Total cryptocurrency market capitalization also increased by about 11% over the same period, to roughly $2.95 trillion from about $2.65 trillion.
Hougan cited restrictions on stablecoin rewards as a leading example. The final version of the bill included a provision that would have barred platforms from paying interest or yield on customers' stablecoin balances. With the bill stalled, exchanges including Coinbase can continue to offer those reward services under the current GENIUS Act framework.
He also said the bill's failure could benefit established large exchanges. Hougan wrote that the CLARITY Act would have introduced a nationwide licensing regime that made it easier for new entrants to enter the market, while also imposing restrictions on companies offering both exchange and brokerage services.
Hougan also highlighted separate regulatory actions by the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission after work on the bill stopped. A few days after the vote, the SEC introduced a five-year "innovation exemption" allowing limited trading of tokenized U.S. stocks on on-chain platforms.
The SEC also issued additional guidance on token buybacks. In a recently updated frequently asked questions document, the agency said a token sale would not be considered an investment contract solely because an already operational cryptocurrency network announces a token buyback plan.
Still, Hougan said the current framework, which relies on agency action rather than congressional legislation, carries the risk that policy could shift under a future administration. He summed up the current situation this way: "Crypto gave up long-term certainty in exchange for better rules sooner."
