Written by Matt Hougan, Chief Investment Officer at Bitwise
Compiled by Chopper, Foresight News
If you’re like me and have had enough of the endless debates surrounding the CLARITY Act, let’s be honest: Congress should pass this bill. If implemented, the crypto industry would benefit significantly. The CLARITY Act is not perfect, but it is a solid piece of legislation that can boost the U.S. economy, protect investors, strengthen ethical safeguards, and help the United States gain a competitive edge in the era of on-chain finance.
However, this landmark crypto legislation has been under review in Congress since May 2025. Its origins trace back to the earlier FIT21 bill, which passed in the U.S. House of Representatives in May 2024—804 days ago.
Over the past few months, many of us, including myself, have viewed this week as a critical juncture for the success or failure of the CLARITY Act. This is because the U.S. Senate will enter its August recess on Friday, August 7, and will not reconvene until September 14. Under Senate rules, to secure a vote before the recess, senators must file a cloture motion no later than Wednesday, August 5.
The prevailing view is that if Congress fails to vote on the bill before its August recess, it is likely to die, and lawmakers will soon shift their focus to the November election. Polymarket predicts the probability of the bill passing in 2026 is only 27%, down from 82% in February of this year.
The best-case scenario for the crypto industry is the successful passage of the CLARITY Act. If this happens, I expect the crypto market to enter a new bull cycle. However, given the low probability of this outcome, I outline here the scenarios the market may face if the bill fails to pass.
First, the bill will not truly die.
First, the bad news: even if the CLARITY Act fails to pass this week, the matter won't be settled. The bill will enter a "zombie state"—not fully repealed, but only able to move forward with great difficulty.
As the August deadline approaches, rumors have emerged that the bill may be postponed for a vote until September. Some have even suggested delaying it until December—the period during which Congress reconvenes for its lame-duck session (a lame-duck session refers to the period after the November congressional elections and before new members are sworn in on January 3, when the outgoing Congress continues to conduct business). The U.S. Congress frequently bundles multiple bills into an end-of-year omnibus spending package, compelling lawmakers to vote on a comprehensive set of provisions that include both favored and opposed measures. Some hope the CLARITY Act will pass through this mechanism. After Wednesday’s deadline, further reports are expected to emerge, discussing the possibility of “smuggling” the bill through during the fall and winter months.
The negative impact of this matter is that the uncertainty brought by the bill has caused many professional institutional investors to hold back. They are reluctant to invest in crypto assets only to face potential legislative failure and a subsequent market decline. Institutions prefer to wait until the situation becomes clearer before taking action.
If the bill fails to pass this week, the most favorable scenario is that the probability of its passage on Polymarket drops significantly, falling to at least the low teens. If this occurs, the market may experience brief volatility but will be positioned for a rebound in the fall.
Second, the cryptocurrency industry will continue to move forward.
More importantly, the cryptocurrency industry itself will not suffer a fatal blow.
Even if the CLARITY Act does not pass, the industry will find its own path. Last week, SEC Chairman Paul Atkins made this point very clear in an interview with CNBC, stating that the SEC is "ready, willing, and able to issue regulatory rules to address the same issues as the CLARITY Act."
There is a trade-off here. In the short term, regulatory rules issued by the SEC under Atkins are likely to be more favorable to the crypto industry and innovation than legislation born from partisan congressional debates, and could even act as a catalyst for the sector. However, the risk is that a future administration may appoint an SEC chair with hostile views and overturn these rules.
Even so, I believe it will be difficult for the next SEC chair to reverse the momentum of the crypto industry. The sector is moving forward rapidly, with financial services increasingly migrating on-chain. BlackRock’s most profitable ETF is the Bitcoin ETF; giants like Nasdaq and JPMorgan are aggressively advancing asset tokenization; Visa, Mastercard, Stripe, and Coinbase have partnered to launch a stablecoin platform; and Robinhood has already launched its own blockchain, integrated with DeFi applications such as Uniswap and Morpho.
Meanwhile, crypto companies are integrating into the U.S. federal banking system, with the Office of the Comptroller of the Currency (OCC) having granted trust charters to Circle, Ripple, Paxos, and an increasing number of firms. Countries and regions worldwide—including the European Union, Japan, and even Russia—are racing to enact favorable legislation for the crypto industry.
The box has been opened and can never be closed again.
If the CLARITY Act fails and regulation is instead left to the SEC, the crypto industry still has at least two and a half years of growth window—until a new administration may appoint a new SEC chair. By that point, no matter who the SEC chair is, they won’t be able to close the Pandora’s box that has already been opened.
The reality is that Washington has always been slow to respond to major technological shifts, and the eventual impact has often been less severe than anticipated. In 1994, the House of Representatives overwhelmingly passed a sweeping telecommunications reform bill with a vote of 423 in favor and 4 opposed, but the final bill stalled in the Senate without ever coming to a full vote. Does that sound familiar? Yet the internet did not wait. Over the next two years, Netscape Navigator was released and went public; Amazon and eBay were founded; and the number of websites grew exponentially. Congress eventually caught up—in 1996, the Telecommunications Act passed the Senate by a landslide margin of 91 to 5, laying the foundation for decades of industry growth. Looking back, the two-year policy delay did not truly slow the industry’s progress.
The U.S. government’s governance efficiency leaves much to be desired. It is absurd that legislation capable of both protecting investors and encouraging innovation has yet to be enacted. However, this cannot be used to judge whether crypto assets deserve a place as part of the global financial infrastructure. Crypto has already become an integral part of finance. Today, the crypto industry has amassed sufficient momentum; regardless of Congress’s decisions in the coming days, it will reshape the entire financial system for decades to come.