Clarity Act Failure Could Push U.S. Crypto Firms Toward Overseas Rules

The United States could fall behind overseas crypto markets in the near term following the Senate’s failure to advance the Clarity Act, although forthcoming rules from the SEC and CFTC could still provide the industry with a regulatory foundation.

The Senate vote on Tuesday left the U.S. crypto sector without a comprehensive federal framework and added to uncertainty surrounding the respective responsibilities of the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC).

That lack of regulatory certainty is already having consequences. U.S.-focused crypto infrastructure companies were among the first to feel the impact, with publicly traded firms including crypto exchange Coinbase Global and stablecoin issuer Circle Internet falling 10% following the vote.

For American retail investors, the setback means continued uncertainty around access to a clearly regulated crypto market. Institutions also face less certainty when considering large-scale investments. More broadly, the United States risks losing ground in the growing competition among jurisdictions seeking to establish themselves as major global crypto centers.

“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, whose exchange primarily targets Asian markets and ranks fifth on CoinGecko, said overseas digital-asset service providers operating under established regulatory licenses could benefit in the short term.

However, he added that prolonged uncertainty in the U.S. could ultimately hurt the broader crypto sector, regardless of where individual companies are headquartered.

U.S. Trails Markets With Established Crypto Rules

The Senate deadlock leaves the U.S. and U.K. among the major global financial centers still waiting for comprehensive crypto rules, with the U.K.’s full framework not scheduled to take effect until next year.

Elsewhere, regulatory progress has moved further ahead. The European Union adopted its Markets in Crypto-Assets (MiCA) framework in 2023, with the rules becoming fully effective in July. Several Asian financial centers are also continuing to develop 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 company CertiK.

Muehlbauer said overseas crypto hubs, gray-market operators and jurisdictions across Asia and Europe stand to benefit as they expand their market share under more established regulatory regimes.

The SEC and CFTC can still develop rules within their existing authority. The SEC demonstrated that approach Thursday when it introduced its “innovation exemption” for tokenized securities trading, potentially giving U.S. companies a regulatory route forward.

But Muehlbauer said agency-level action cannot fully replace legislation. A statutory framework could be particularly important for businesses making decisions about long-term investment, new product launches and compliance expenses.

Industry Divided Over Shift to Asia

Gracy Chen, CEO of crypto exchange Bitget, was more cautious about the possibility of trading activity moving from the United States to Asia because of the Senate vote.

“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 prolongs uncertainty surrounding U.S. market structure and how digital assets will be regulated. However, she said Bitget’s plans to establish a U.S. presence with the appropriate licenses and corporate structure are not dependent on the legislation becoming law.

Matt Hougan, chief investment officer at Bitwise Asset Management, characterized the failed vote as a setback rather than a fundamental reversal.

“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 out that President Donald Trump’s pro-crypto administration still has two and a half years remaining, leaving time for further regulatory and legislative developments.

He also said the Senate outcome should not prevent investors from evaluating smaller digital assets that have strong token economics and connections to real-world assets.

Agency Rules Could Become More Important

Tom Farley, CEO of CoinDesk owner Bullish, similarly argued that the legislation’s failure does not make regulatory progress impossible.

“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,” he said in a post on X.

Farley said SEC and CFTC rulemaking could have greater near-term significance for tokenized securities, including regulations governing issuers, transfer agents and issuer-sponsored tokens.

Nilmini Rubin, chief policy officer at Hedera, said Tuesday’s vote does not bring the broader legislative effort to an end.

“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 U.S. competitiveness could remain under pressure while the country lacks clear rules.

“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 added that areas such as stablecoins, tokenization and cross-border payments are likely to continue expanding regardless of the Senate vote. At the same time, she said the lack of a statutory framework could make it more difficult to protect U.S. consumers.

Industry Still Expects Regulatory Progress

Despite the setback, some digital-asset executives remain optimistic that U.S. regulators will continue developing rules for the industry.

The SEC and CFTC have both indicated that they intend to provide greater regulatory clarity within their existing authority, potentially allowing parts of the crypto sector to move forward even without comprehensive legislation.

U.S. lawyer Richard B. Levin, chair of FinTech and regulation at Taft Stettinius & Hollister LLP, captured the uncertain path ahead 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.”

About The Author