CLARITY Act Faces Setback in Senate, Future Uncertain Amidst Regulatory Shifts

The much-anticipated Digital Asset Market Clarity (CLARITY) Act has failed to advance in the US Senate, a significant blow to proponents seeking to establish a clearer regulatory framework for digital assets. The cloture motion, crucial for moving the bill forward, was defeated with a vote of 49 in favor and 50 against, falling short of the 60-vote threshold required. However, the situation is nuanced, with Republican Senator Thom Tillis casting a "no" vote strategically to enable future reconsideration. This move echoes the past experience of the GENIUS bill, which, despite an initial failed cloture vote, was ultimately passed just eleven days later.

While a slim possibility remains for the CLARITY Act’s resurrection, the current political climate and limited legislative calendar present substantial obstacles. Congressman Shri Thanedar, a Democrat who supported the CLARITY Act in the House, highlighted the critical timeline challenge, stating, "There are only 20 legislative days left in this Congress, all of them after the midterms, making odds of a 2026 compromise, unfortunately, very low." Seven Democratic senators who voted against the bill have asserted their continued commitment to its passage, with Senator Angela Alsobrooks noting, "We were ready to strike a deal today and in discussions right up until the vote. Republican leadership shut it down at the very last minute." Abhishek Vaidyanathan, NEAR’s chief legal officer, pointed out the impact of canceled House sessions and the Senate’s state work period commencing October 5th, suggesting, "Now that cloture failed, the next Congress is the likely next opportunity to address crypto market structure."

In the absence of legislative clarity, US regulators are actively stepping in to fill the void. Following the CLARITY Act’s setback, Ripple CEO Brad Garlinghouse predicted that regulators would "continue to work hard to issue rules to fill the legislative gap." This prediction proved accurate as the US Securities and Exchange Commission (SEC) announced a five-year exemption for the limited trading of tokenized US stocks on decentralized public blockchains. This "Innovation Exemption" permits the use of automated market makers for tokenized stock trading without requiring registration as securities exchanges. However, the exemption does not extend to "synthetic" stock tokens that do not grant holders the same rights as traditional stocks, posing a challenge for existing offerings from companies like xStocks and Robinhood.

Simultaneously, the Commodity Futures Trading Commission (CFTC) has introduced regulatory relief for providers of "passive software" that connects users to regulated derivatives firms and exchanges. The CFTC issued a no-action position that will prevent enforcement actions against qualifying providers for failing to register as introducing brokers or associated persons when facilitating trades with CFTC-registered entities. This move is expected to simplify access to regulated derivatives, including perpetual contracts and prediction markets, for crypto wallets and applications. Furthermore, the CFTC has submitted draft crypto rules, titled "Regulation Crypto Asset Transactions and Regulation Crypto Asset Markets," to the White House for review, currently at the "prerule" stage. In parallel, Coinbase and Kalshi have both filed applications with the CFTC to offer 24/5 perpetual futures trading for individual US stocks, signaling a growing demand for such products.

On the legislative front, the American Reserve Modernization Act of 2026 has garnered bipartisan support, passing the US House Committee on Financial Services. This bill would codify the establishment of a "Strategic Bitcoin Reserve" into law, supplementing an existing executive order, and would also create a Digital Asset Stockpile within the Department of the Treasury for other forfeited cryptocurrencies. The legislation mandates comprehensive audits of digital assets held by federal agencies and requires quarterly "proof of reserve" reports. It also directs a study into budget-neutral acquisition strategies for expanding the reserve. Connor Brown, executive director of the Bitcoin Policy Institute, hailed the bill as a "genuinely historic step for Bitcoin policy." Additionally, the US House Ways and Means Committee advanced the Digital Asset Tax Certainty Act, aiming to reform the federal tax treatment of digital assets.

In a concerning development, Revolut has been targeted by a second hacker demanding a $3 million ransom in Monero for sensitive customer data, including passports and KYC selfies. This follows an initial demand of 10,000 Bitcoin (approximately $780 million) from a group claiming to be "Revolut Smilik." The second hacker, identifying as "IAmNotAVillain," suggested the initial demand came from a former associate with only partial access to the stolen data. This incident underscores the significant risks associated with the storage of personally identifiable information.

Market Performance and Predictions

The cryptocurrency market saw a generally positive week, with Bitcoin (BTC) up 5.9% to $81,185, Ethereum (ETH) gaining 6.6% to $2,639, and XRP (XRP) rising 5.4% to $1.40. The total market capitalization reached $2.78 trillion. Among the top 100 cryptocurrencies, NEAR Protocol (NEAR) led the gains with a 76.4% increase, followed by Arbitrum (ARB) at 64.3%, and Ethena (ENA) at 61.6%. The week’s top altcoin losers included Stable (STABLE) down 11.6%, Pi (PI) down 11.3%, and SPX6900 (SPX) down 1.8%.

Standard Chartered has issued a bullish prediction for Arbitrum (ARB), forecasting its price could reach $10 by 2030, representing a potential 70-fold increase from current levels. Analyst Geoff Kendrick attributes this optimistic outlook to Arbitrum’s economic model, which benefits from a 10% share of the net protocol revenue generated by projects built on its network, citing Robinhood Chain as a key driver of recent revenue growth. Potential risks to this projection include a slower pace of asset tokenization and increased competition from alternative blockchains.

FUD and Regulatory Scrutiny

Chainalysis reports a significant surge of 420% in on-chain malware activity over the past year, with state-linked hackers accounting for a substantial portion of this increase. North Korea and Iran are identified among the state actors employing this tactic, using public blockchains to store malware instructions and infrastructure information, thereby enhancing the durability of their campaigns.

Researchers at the Bank for International Settlements (BIS) have identified a considerable discrepancy in estimates of Bitcoin on-chain transfer values, with variations as high as sixfold depending on the measurement methodology. This disparity extends to Bitcoin’s market capitalization, where conventional measures can be up to four times higher than realized capitalization.

In Hong Kong, a former bank official has been sentenced to four years in prison and ordered to pay over $470,000 in restitution for receiving cryptocurrency bribes. Lam Chun-yin was convicted of falsely authenticating letters of credit valued at more than $1.6 billion.

Key Magazine Features

Cointelegraph’s magazine section delved into several critical topics this week. An in-depth analysis explored the lingering possibilities for the CLARITY Act, examining its narrowing path forward amidst ongoing demands for changes. Another feature debated the potential of Bitcoin treasury firms to outperform Bitcoin itself, questioning whether the amplified returns justify the inherent risks. Additionally, a piece highlighted the dangers of current Know Your Customer (KYC) practices, as evidenced by the Revolut data breaches, and proposed zero-knowledge technology as a more secure alternative for identity verification.