The CLARITY Act, which everyone called a setback, failed... Bitwise: "It has rather opened up opportunities for cryptocurrency"

▲The CLARITY Act, which everyone called a setback, failed... Bitwise: "It has rather opened up opportunities for cryptocurrency" /ChatGPT generated image ©

Analysis suggests that the failure of the U.S. CLARITY Act to pass the Senate has, contrary to expectations, opened up new opportunities in the cryptocurrency market. Bitwise stated that after the bill's failure, Bitcoin (BTC) and Ethereum (ETH), as well as Near Protocol (NEAR), Uniswap (UNI), and Avalanche (AVAX), rose significantly. It assessed that regulatory flexibility surrounding stablecoin rewards, tokenization, and protocol revenue-based tokens has actually expanded.

According to the investment media FXStreet on October 1 (local time), Matt Hougan, Chief Investment Officer (CIO) at Bitwise, stated that Bitcoin rose 8% and Ethereum rose 7% after the CLARITY Act was stranded in the U.S. Senate. The increase in altcoins was even greater. Near Protocol rose 104%, Uniswap 49%, and Avalanche 43%. While the cryptocurrency industry supported the CLARITY Act for providing regulatory clarity, Hougan pointed out that the final negotiation process included compromises that could restrict parts of the industry.

A key issue was stablecoin rewards. The final version of the CLARITY Act prohibited trading platforms from paying customers stablecoin interest or yields in any form and imposed a fine of up to $5 million per violation. However, with the bill's failure, the existing GENIUS Act remains in effect. The GENIUS Act prohibits stablecoin issuers from paying interest but does not impose the same restrictions on exchanges. Hougan analyzed that this maintains the room for trading platforms to offer rewards on customers' stablecoin balances.

It is also assessed that new avenues have opened up in the tokenization sector. Two days after the CLARITY Act failed to pass, the U.S. Securities and Exchange Commission (SEC) issued an order allowing the trading of tokenized U.S. stocks through permissioned Automated Market Makers (AMMs) and liquidity pools. It exempted participating platforms from securities exchange registration and liquidity providers from dealer registration. While the application period is five years and conditions such as U.S. listed stocks and trading volume limits apply, Hougan emphasized the significance of being able to test new systems in the actual market instead of waiting for years of regulatory research.

Projects utilizing protocol revenue for token buybacks were also mentioned as beneficiaries. Hougan cited Near Protocol and Uniswap as examples, explaining that under the CLARITY Act regime, there could have been uncertainty about how buybacks would affect the regulatory classification of tokens. In contrast, after the bill's failure, the SEC provided guidance indicating that the mere fact of announcing a buyback program does not make a token a security if the network has reached a stage where it is actually functioning, according to the media.

Hougan assessed that the failure of the CLARITY Act cannot be seen as a mere setback in cryptocurrency regulatory progress. While comprehensive regulatory framework development at the congressional level has been halted, new opportunities have emerged under existing laws and individual SEC rules for stablecoin rewards, tokenization platforms, and revenue-generating tokens. However, the possibility of regulatory authorities taking different approaches in the future remains a risk factor, and Hougan predicted that as the adoption of blockchain by major financial institutions continues to expand, it may become more difficult to significantly reverse the regulatory direction.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*