Crypto for Advisors: The CLARITY Act failed, but the rules came anyway

A proposed comprehensive federal framework for digital assets known as the CLARITY Act failed to advance in the U.S. Senate on Sept. 15, leaving lawmakers without a statutory roadmap for tokenized money, securities, and related market infrastructure. Advocates had argued the bill would have offered clear rules for banks, exchanges, issuers and intermediaries to operate and invest in tokenized markets. With the legislation stalled, regulators have begun issuing their own guidance and limited permissions to fill some of the gap.

Two days after the CLARITY vote, the Securities and Exchange Commission adopted a five-year "Innovation Exemption" that permits certain venues to facilitate onchain trading of eligible tokenized U.S.-listed stocks using automated market makers and liquidity pools. Under the order, qualifying platforms need not register as exchanges for the covered activity, some liquidity providers receive relief from dealer-registration requirements, and trading is restricted to identity-verified participants. SEC Chairman Paul Atkins characterized the measure as a temporary bridge toward more permanent rules.

The Commodity Futures Trading Commission has also taken steps to reduce practical barriers for market participants. The CFTC provided relief targeted at some software providers and issued updated guidance concerning tokenized investments and blockchain-based recordkeeping. Taken together, agency actions aim to create operational space for tokenized products and infrastructure despite the absence of statutory clarity from Congress.

Industry voices describe this regulatory activity as offering short-term permission to build, but they emphasize an important distinction: agency orders and guidance can be changed by future administrations or regulators, whereas legislation provides longer-term certainty that encourages large, long-duration investments. Observers note the moment could be decisive if companies and financial institutions use the window to deploy useful products and infrastructure that demonstrate value to consumers and markets.

The unfolding dynamic presents two competing paths for incumbents and innovators: wait for Congress to enact comprehensive law, or proceed under the permissions regulators are currently offering. Regulators' moves do not replicate all elements of the proposed CLARITY Act, so the durability of these policies and their ability to support widescale institutional commitment remain open questions.