Crypto companies and advocates had hoped the Senate would advance the Clarity Act before its August recess. It didn’t happen. Senators left Washington for a five-week break without holding the anticipated vote, leaving the bill’s future – and the broader effort to create a federal framework for digital assets – unresolved.
So, what now?
The bill isn’t dead, but its next test isn’t a final vote. Senate Majority Leader John Thune has set up a September 15 procedural vote that would require 60 senators to move the legislation forward. Even if that succeeds, additional debate, amendments and votes could follow – and Reuters reports that analysts and lobbyists are increasingly concerned about its passage this year.
Is that a guarantee? When it comes to politics, it can seem like nothing is a guarantee that you can depend on.
Congress isn’t the only place where the crypto rulebook is being written. The SEC has been developing several initiatives of its own – although one of them just encountered a delay, too.
The agency had scheduled an August 14 meeting to consider proposing a new regulatory framework for certain crypto offerings. (On August 13, however, the SEC canceled that meeting because of what a spokesperson described as an unforeseen scheduling issue. No new date was announced in the cancellation notice.)
But don’t misunderstand – the SEC is still moving forward…
Crypto regulation is still moving – but not in a straight line
The SEC has two significant crypto projects in development, although neither should yet be mistaken for a finished rulebook.
One would create a tailored framework for certain crypto assets sold as part of investment contracts. The Commission had planned to consider formally proposing that framework on August 14 before canceling the meeting. Bloomberg describes it as an attempt “to create a tailored offering regime for certain investment contracts involving crypto assets.”
Separately, SEC Chairman Paul Atkins has been developing what he calls an “innovation exemption,” intended to allow limited experimentation with certain tokenized securities while the agency works toward longer-term rules.
The second initiative could be particularly interesting because it sits at the intersection of traditional securities markets and blockchain technology.
The initiative is expected to address trading in certain tokenized securities – traditional securities whose ownership is represented or recorded using blockchain technology rather than traditional finance’s depository and custodial agencies. Rather than establishing a permanent new rulebook immediately, the proposed innovation exemption could give qualifying market participants room to experiment, to keep innovating, while the SEC develops longer-term regulations.
A big concern has to do with some tokenized possibilities such as third-party tokens for securities trading which could be issued without the consent or backing of the company whose stock is being tokenized. The SEC could include an option for companies to be able to prevent third-party tokenization of their stock without their consent. (I mean, that’s problematic for obvious reasons – if someone tokenizes your house and sells it, what do the buyers really own?)
If the SEC ultimately creates a workable exemption, it could make it easier for financial firms to trade securities on blockchain infrastructure. That would be another sign of blockchain technology moving deeper into traditional finance. It doesn’t necessarily mean greater adoption of cryptocurrencies themselves, though. A tokenized stock remains a security, regardless of the technology used to record or trade it. Tokenization is more of an upgrade to traditional assets, allowing them to benefit from the speed, convenience and reliability of blockchain technology.
There is also an important difference between agency guidance and formal rulemaking. SEC rules generally go through a public proposal-and-comment process before becoming final, giving market participants something more concrete than informal guidance alone.
But even formal SEC action cannot settle every question. Chairman Atkins himself has acknowledged that a future Commission could reverse course—which is one reason congressional legislation still matters.
How much can the SEC do without Congress?
Not everything. The SEC administers federal securities laws, so it can clarify how those laws apply to crypto offerings, tokenized securities and trading systems within its jurisdiction. But Congress can do something much broader: change the law itself and define the respective roles of regulators such as the SEC and Commodity Futures Trading Commission.
That distinction matters. Agency action can reduce uncertainty in particular corners of the market, but it cannot provide the same comprehensive and potentially more durable framework that new legislation could establish.
There is another, narrower example of the SEC adapting existing rules to blockchain-based financial infrastructure. On August 12, staff in the SEC’s Division of Investment Management issued Franklin Templeton a no-action letter concerning certain custody requirements.
Under the specific arrangements described by Franklin Templeton, the staff said it would not recommend enforcement action if affiliated funds invest in shares of the Franklin OnChain U.S. Government Money Fund without complying with several custody provisions originally designed around physical or certificated securities.
Now, this is a big change from the SEC’s former approach of offering no guidance up front, and enforcement actions against fully-developed projects!
The takeaway from this lack of action in going after Franklin Templeton is that the SEC is signaling an openness to blockchain technology under specified controls.
Franklin Templeton says the OnChain fund offers operational features its current cash-management vehicle simply doesn’t, including hourly net asset value (NAV) calculations, intraday trading, faster transaction processing, enhanced data security and lower costs.
The important point here isn’t that blockchain has been proven better for every financial task. Rather, we’re seeing a major asset manager implementing blockchain solutions. And the SEC showing a willingness to adapt rules written for an earlier technological era, at least when appropriate safeguards are in place.
Now that’s great and all, but I’m sure you’re wondering…
…what does this mean for you?
For investors, the picture is more complicated than either “crypto regulation has stalled” or “regulatory clarity has arrived.”
Congress has yet to settle some of the biggest questions about digital-asset market structure. At the same time, the SEC continues working within its existing authority on crypto offerings, tokenized securities and blockchain-based financial infrastructure. Those efforts may narrow particular areas of regulatory uncertainty, but they don’t eliminate it.
For someone evaluating digital assets as a long-term investment, regulatory development is one major factor worth following – but hardly the only one. Crypto still carries substantial volatility, and questions such as time horizon, liquidity needs, risk tolerance and the role it would play within your broader savings. These factors are important regardless of what happens in Washington.
If you’d like to continue your due diligence, our free Crypto IRA Guide explains how eligible digital assets can be held within an IRA, including the account structure and important questions to consider before deciding whether a Digital IRA fits your retirement strategy.
