Clarity Act failure may hamper U.S. crypto as industry seeks legal clarity elsewhere

Han, whose crypto exchange focuses primarily on Asia and is ranked fifth on CoinGecko, said the short-term winners are likely to be digital asset service providers with licenses in overseas regulated markets. Even so, the U.S. limbo is not good for the industry overall, regardless of where crypto service providers are based, he said.

The Senate impasse leaves the U.S. and U.K., whose full rules don't come into effect until next year, among the few major global financial hubs without clear rules for the industry. The European Union adopted its Markets in Crypto Asset (MiCA) regulations, which came into full effect in July, in 2023, and Asian markets are advancing their digital asset frameworks.

“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. The winners are overseas crypto hubs, grey-market operators and international jurisdictions like Asia and Europe that are rapidly expanding their market share under clear, established rules, he said.

While the SEC and CFTC can promulgate their own rules — as seen Thursday when the SEC published its "innovation exemption" for tokenized securities trading — giving U.S. companies a path forward, that is no substitute for legislation, Muehlbauer said. Clear legislation is likely to matter most to firms weighing investment, product introductions and compliance costs over several years.