Crypto Market Jumps 11% After CLARITY Act Stalls; Bitwise Says Regulatory Burden Eased

The crypto market has continued to rally even after the CLARITY Act, a U.S. market-structure bill for digital assets, stalled in the Senate, prompting analysis that the market benefited from avoiding some of the regulatory burdens embedded in the legislation.

The Block reported on October 30 that Matt Hougan, chief investment officer at Bitwise, wrote in a recent report that while the collapse of the CLARITY Act denied the crypto industry long-term regulatory clarity at the federal level, it also spared the sector provisions that could have limited its growth.

The Senate failed to advance the bill in a procedural vote on September 15, when it fell short by a 49-50 vote. At the time, the market had expected the bill's failure to weigh on crypto prices. Instead, the opposite happened. Since September 15, Bitcoin has risen about 11% and Ether about 12%, while some smaller digital assets have posted even bigger gains. Total crypto market capitalization also increased about 11% over the same period, to roughly $2.95 trillion from about $2.65 trillion.

Hougan cited restrictions on stablecoin rewards as a key 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 offering such rewards under the current GENIUS Act framework.

He also said the bill's failure may work in favor of large incumbent exchanges. Hougan wrote that the CLARITY Act would have introduced a nationwide licensing regime that could have made it easier for new entrants to enter the market, while also imposing constraints on companies that provide both exchange and brokerage services.

He also highlighted separate regulatory steps taken by the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission after the bill's progress 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 provided additional guidance on token buybacks. In an updated frequently asked questions document, the agency said a token sale should not be treated as an investment contract solely because an already functional crypto network announces a token buyback plan.

Still, Hougan wrote that the current framework, which relies on regulatory agencies rather than congressional legislation, carries the risk that policy direction could change under a future administration. He summed up the situation this way: Crypto sacrificed long-term certainty but got better rules faster.