Crypto's Sisyphean struggle
Progress will effectively reset when the new Congress is sworn in, because key senators who quarterbacked the bill will not be on the ballot again, writes the Cato Institute's Ryan Chan-Wei.
Sisyphus was condemned by the gods to push a boulder uphill, only to watch it roll back down again and again. After years of pushing for regulatory clarity, crypto appears doomed to a similar fate. The latest attempt—all 635 pages of it—has rolled down the hill once more.
The Senate recently failed to advance the Digital Asset Market Clarity Act, also known as the Clarity Act, and with the midterms around the corner, there is no realistic path to reviving it before the end of the year.
The Clarity Act, as its name suggests, sought to establish a framework for market structure: the rulebook that sorts crypto tokens into legal categories, licenses the firms trading them, and determines how supervisory authority should be divided between the Securities and Exchange Commission and the Commodity Futures Trading Commission.
Ryan Chan-Wei is a research fellow at the Cato Institute's Center for Monetary and Financial Alternatives.
If enacted, the bill would have unlocked crypto's considerable potential, including its ability to expand financial inclusion and reduce the costs of cross-border payments. Realizing any of that at scale takes more than technical ingenuity, because regulated institutions naturally hesitate to commit capital while the rules remain unwritten, and everyday Americans have little reason to trust a market that no one fully oversees.
Congress has long understood the need for a comprehensive regulatory framework. Legislative efforts date back to the Token Taxonomy Act of 2018, and successive attempts across four Congresses have all faltered, though none came as close as the Clarity Act.
Progress will effectively reset when the new Congress is sworn in, because key senators who quarterbacked the bill will not be on the ballot again. Cynthia Lummis (R-WY), who chairs Senate Banking's Subcommittee on Digital Assets, is retiring, and so is Thom Tillis (R-NC), who helped broker the bipartisan compromise on stablecoin rewards that cleared the Clarity Act's path out of committee.
What makes the bill's defeat all the more exasperating is that the hardest part was already done. The fundamental questions concerning market structure had largely been resolved, which explained the uniquely broad coalition that assembled behind the bill. Wall Street and the crypto industry made for unlikely bedfellows, yet firms such as Goldman Sachs and BlackRock also endorsed the Clarity Act.