Crypto Bill Stalled, but Bitcoin Rose: Bitwise Says Bad News Became an Advantage
Bitwise Chief Investment Officer Matt Hougan argued that the crypto bill stalling in the U.S. Senate prevented certain restrictions and gave crypto unexpected advantages as Bitcoin and Ethereum rose.
In his assessment dated September 30, as reported by The Block, Hougan examined why crypto markets moved contrary to expectations. The CLARITY Act, which aims to establish a regulatory framework for digital asset markets, failed to advance in the Senate on September 15, with 49 votes in favor and 50 against.
From that date through September 30, when the assessment was published, Bitcoin rose about 11%, while Ethereum gained 12%. The total cryptocurrency market capitalization also climbed from $2.65 trillion to about $2.95 trillion, an increase of $300 billion. Contrary to expectations that the bill’s stalled progress would interrupt the previous rally, the market continued to rise.
What advantages were preserved when the bill failed?
The first issue Hougan highlighted was rewards on stablecoin balances. The bill’s latest version would have prohibited platforms from paying customers interest or yield on these balances. With the legislation stalled, exchanges such as Coinbase were able to continue offering rewards under the existing GENIUS Act framework.
Competitive conditions for established exchanges also remained unchanged. The bill would have created a nationwide licensing mechanism that could make it easier for new competitors to enter the market, while also imposing restrictions on companies that offer both exchange and brokerage services. According to Hougan, the failure of these provisions to take effect strengthened the position of major incumbent exchanges.
SEC takes steps on tokenized stocks and buybacks
A few days after the Senate vote, the U.S. Securities and Exchange Commission (SEC) introduced a five-year innovation exemption allowing limited trading of tokenized U.S. stocks on blockchain-based platforms.
An FAQ guide later updated by SEC staff also clarified token buybacks. According to the guide, announcing a buyback on an already-operational crypto network does not, by itself, turn a token sale into an investment contract.
Hougan sees these developments as crypto giving up long-term legal certainty in exchange for reaching more favorable rules more quickly. However, this approach has a significant gap: Because the rules have not been codified into law by Congress, a future administration could change course. As a result, the steps taken by regulators today do not yet offer the assurance that a permanent law would provide.