The Senate cloture vote on the Clarity Act fell short at 49 to 50 on Tuesday, well below the 60 votes needed, largely over Democratic objections to ethics provisions and Republican concerns about stablecoin interest. Politico reported that several Republican senators who voted in favor during cloture still expected the final legislation to be altered to accommodate banking industry concerns. Most coverage will frame this as a loss for the crypto industry and a win for incumbent financial institutions. The reality is more layered.
The legislation went well beyond crypto market structure and stablecoin interest, enshrining bank permissions for a wide range of crypto and distributed ledger activities and giving the SEC statutory cover for tokenized securities. The failure leaves these areas exposed in different ways, and the biggest winners may be offshore jurisdictions where statutory frameworks already exist.
Regarding banking rules, the legislation includes a section allowing a wide range of activities, many of which are already permitted in other jurisdictions. They include providing crypto custody (including staking services), crypto brokerage, payment related activities and operating distributed ledger nodes. The legislation also supports banks holding crypto tokens to facilitate on chain transactions, such as paying for gas. A handful of allowed activities might particularly favor investment banks such as Goldman Sachs and Morgan Stanley, and explain the supportive views on the Clarity Act expressed by Goldman CEO David Solomon. Those permissions cover crypto collateral for lending, derivatives activities and customer driven market making.
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