Clarity Act Collapse Leaves U.S. Crypto Industry Seeking Regulatory Clarity Elsewhere

The U.S. crypto market could lose some momentum to foreign jurisdictions in the near term after the Senate failed to advance the Clarity Act, although rules from the SEC and CFTC may still provide parts of the industry with a route forward.

The legislation’s failure Tuesday means the world’s largest economy remains without a comprehensive federal framework for digital assets. It also leaves uncertainty over how regulatory responsibilities should be divided between the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC).

The impact was quickly reflected in crypto-related stocks. Coinbase Global and stablecoin issuer Circle Internet were among U.S.-focused companies whose shares fell 10% after the vote.

The uncertainty affects more than listed companies. Retail investors in the U.S. continue to lack a single, clearly defined regulatory structure for crypto markets, while institutional investors face additional questions when considering large-scale allocations.

The policy gap could also make it more difficult for the U.S. to compete with other jurisdictions seeking to attract crypto businesses, investment and talent.

“The practical reality is that capital and talent move toward environments where the rules are clearest,” said Lin Han, CEO and founder of crypto exchange Gate.

Han said overseas digital-asset providers with licenses in established regulatory markets could benefit in the short term. Gate focuses mainly on Asia and ranks fifth on CoinGecko.

He added that the lack of clarity in the U.S. remains a problem for the broader crypto sector, regardless of where companies choose to operate.

Overseas Markets Push Ahead

The U.S. and U.K. are now among the major global financial centers still waiting for comprehensive crypto regulations. Britain’s full regulatory framework is not expected to take effect until next year.

The European Union has already moved further ahead with its Markets in Crypto-Assets (MiCA) framework, adopted in 2023 and fully effective in July. Several Asian markets are also expanding their digital-asset regulations.

“The true losers are the American public and the domestic tech ecosystem,” said Stefan Muehlbauer, head of U.S. government affairs at blockchain security firm CertiK.

Muehlbauer said international crypto hubs, gray-market operators and jurisdictions in Asia and Europe could benefit from the uncertainty as companies seek markets with established regulatory frameworks.

The SEC and CFTC still have the ability to establish rules through their existing authority. The SEC showed this Thursday by introducing its “innovation exemption” for tokenized securities trading, giving certain businesses another potential route to operate in the U.S.

Muehlbauer said such agency action cannot fully substitute for legislation. Long-term decisions involving investment, product development and compliance costs require a more durable legal framework, he said.

Crypto Activity May Not Simply Move to Asia

Gracy Chen, CEO of crypto exchange Bitget, cautioned against assuming that the Senate vote will immediately shift significant market activity from the U.S. to Asia.

“I wouldn’t look at it as volume suddenly moving from the U.S. to Asia because of one vote,” she said. “Crypto is inherently a global market, and traders will continue to go where they can find the products, liquidity and access they need.”

Chen said the vote does extend uncertainty over U.S. market structure and the regulatory status of digital assets.

Bitget still intends to enter the U.S. market through the appropriate licensing and corporate structure, she said, regardless of whether the Clarity Act ultimately passes.

Matt Hougan, chief investment officer at Bitwise Asset Management, viewed the failed vote as a setback rather than a major change in direction.

“It would have been better if it had passed,” Hougan said. “With it failing, I think the road ahead is bumpier. But the trend is still good, and I don’t think it’s changed too much from where it was Monday, before the vote.”

Hougan pointed to the remaining two and a half years of President Donald Trump’s pro-crypto administration as evidence that further developments remain possible.

He also said the outcome should not prevent investors from examining smaller digital assets with strong token economics and ties to real-world assets.

Agency Rulemaking Gains Importance

Tom Farley, CEO of CoinDesk owner Bullish, said the legislation’s failure does not necessarily prevent regulatory progress.

“Durable legislation would give the digital asset industry greater certainty. But even with legislation, the real work of implementation happens at the agencies, and agencies can move faster,” Farley wrote on X.

He said rules from the SEC and CFTC could be especially significant in the near term for tokenized securities, including how issuers, transfer agents and issuer-sponsored tokens are regulated.

Nilmini Rubin, chief policy officer at Hedera, said the Senate vote does not mark the end of efforts to establish crypto legislation.

“We’ve seen policymakers put real time and effort into studying the underlying technology, which is a positive step in the right direction,” she said. “I think most of the industry is still as ambitious as ever that we’ll get to where we need to be.”

Rubin nevertheless warned that the absence of clear rules could weaken the U.S. position in the global crypto market.

“The largest loser is U.S. competitiveness because uncertainty pushes innovation and adoption in the U.S. behind other countries,” she said. “The longer the market lacks clear rules, the more difficult it is to ensure the United States remains at the center of this system, rather than on the margins of it.”

She expects stablecoins, tokenization and cross-border payments to continue growing despite the Senate setback. However, Rubin said the lack of a statutory framework could make consumer protection more difficult.

Regulatory Path Remains Open

Despite the Clarity Act setback, crypto executives continue to expect the SEC and CFTC to use their existing authority to develop industry rules.

Agency-level regulations could provide targeted clarity while lawmakers continue debating comprehensive legislation. Whether those measures can deliver the same long-term certainty as a federal law remains unresolved.

Richard B. Levin, chair of FinTech and regulation at Taft Stettinius & Hollister LLP, summed up the uncertainty during a panel at the 2026 European Blockchain Convention in Barcelona:

“You can count on Americans to do it absolutely wrong until they finally get it right.”