Despite Clarity Act Failure, Crypto Winning in Washington: Smith

Despite the Clarity Act's failure, Kristin Smith, president of the Solana Policy Institute, asserts that the crypto sector is gaining ground in Washington. She contends that regulations finalized by federal agencies before summer 2028 may be difficult to overturn.

The proposed Clarity Act, which aimed to establish federal market regulations for digital assets, did not pass the Senate. Yet regulatory changes made by agencies are simpler to undo than legislation, making the timing significant.

Is Crypto Really Winning in Washington?

Smith heads the Solana Policy Institute, an organization focused on crypto policy. Additionally, she is temporarily serving as the chief executive of the Blockchain Association, a trade body.

In an interview with Bloomberg, Smith stated that the crypto industry has already secured the Genius Act, a stablecoin law in the US. A modification to an IRS broker rule was also achieved.

According to Smith, the legislative battle provided political cover for regulators to take action. Separately, the CFTC launched a public comment period on Monday regarding leveraged retail crypto trading.

Smith noted that rulemaking processes at the SEC and CFTC typically require 18 to 24 months.

Under the Congressional Review Act, Congress has the ability to reverse recently enacted agency rules. Smith thinks that regulations finalized before that period, roughly by summer 2028, will be lasting.

What Could Still Block Crypto’s Bigger Bill?

Smith described a potential revival of the Clarity Act ahead of the November midterm elections, or during the subsequent lame-duck session, as improbable yet not impossible.

She identified two obstacles: the president's family crypto business and the fact that banks are not yet completely engaged. Neither issue is expected to be resolved by the end of the year, according to Smith.

Smith contends that traditional financial institutions and international companies would develop based on established regulations, making those rules more difficult to reverse.

Conversely, Matt Hougan, chief investment officer at Bitwise, acknowledges that crypto's progress hinges on regulatory agencies. A future administration could overturn their rules starting in January 2029.

This situation leaves the regulatory future of cryptocurrency in the hands of two agencies competing against a deadline that is under two years away.