A major piece of crypto market structure legislation is losing altitude fast. Grayscale Head of Research Zach Pandl told investors that the CLARITY Act now has a low probability of passage this year, pinned down by a crowded Senate calendar and the tightening grip of election-year politics. His downbeat assessment, shared via the original report, does not assume a straightforward disaster for digital assets. Instead, it draws a more complex map: while Bitcoin, major layer-1s, and stablecoin payments can keep growing without the bill, the absence of a unified U.S. framework opens a door that competitors abroad are already watching.
The CLARITY Act was designed to build a comprehensive rule set for crypto markets, clarifying jurisdiction between the SEC and CFTC and giving crypto exchanges, token issuers, and DeFi protocols a clearer path to operate onshore. That ambition remains stuck in a legislative cycle that has seen legislative efforts in the Senate repeatedly slowed by banking interests and election-year maneuvering. Pandl argues that a failure to pass the bill will not immediately choke existing crypto rails. Bitcoin’s property-like status and the continued expansion of dollar-pegged stablecoins on public networks give the market a floor. But the ceiling is what concerns him.
Rulemaking as a Stopgap
Without a legislative framework, the SEC and other agencies are expected to keep filling regulatory gaps through enforcement actions and incremental rule proposals, particularly around tokenized securities. The approach leaves large swaths of the market in a gray zone. Developers and investors who want bright-line rules may simply choose jurisdictions that offer them. Pandl pointed to this dynamic when he warned that a greater share of new investment and developer activity could migrate outside the United States. That is not an abstract risk. A recent snapshot of blockchain developer activity shows that while Ethereum and Solana remain dominant, significant innovation is already spreading across multiple continents, often where regulators are moving faster.
The SEC itself has signaled that it will push ahead on tokenized asset rules, even as Congress stalls. Just days ago, the market saw its first live tokenized Treasury settlement between a major bank and a DeFi protocol, a milestone that underscores both the technical readiness and the regulatory vacuum. Grayscale’s view is that these piecemeal steps can sustain momentum but cannot substitute for the kind of market structure bill that would lock in the U.S. as the primary hub for crypto capital formation.
What Gets Built During the Wait
The election-year calculus matters because it resets expectations about timing. Bills that miss a mid-summer markup often slide past the finish line into the next Congress. For crypto firms weighing location decisions, that timeline is longer than many can afford. The pivot point is not just about where headquarters sit; it is about where liquidity pools, developer tooling, and institutional custody infrastructure get built. The firms that fill those roles in 2026 and 2027 will shape the next cycle, regardless of what Washington does later.
Pandl’s analysis is careful not to overstate the downside for existing assets. Bitcoin’s correlation with global liquidity cycles and the steady march of stablecoin settlement volumes do not require a U.S. regulatory charter to continue. The question is who captures the next wave of on-chain applications, tokenized credit products, and real-world asset markets. If the U.S. leaves that play open through inaction, there is no shortage of jurisdictions willing to close the gap.
What remains uncertain is whether the Senate can find a window after the midterm noise subsides. Even a delayed markup could send a signal that the door is not fully shut. For now, the market is pricing in a world where U.S. crypto regulation evolves through agency action rather than congressional design. That is a slow, contested process that leaves the industry in a holding pattern while offshore centers sharpen their pitch.
