CLARITY's Failure Has Little to Do with Whether the Crypto Industry Is Good or Bad

CLARITY's failure this time has little to do with whether the crypto industry itself is good or bad.

It conceded 126 Democratic amendments, expanded the text from 300 pages to 635 pages, and even accepted 80% of Trump's ethics proposal—yet in the end it was still 11 votes short, and the Democrats did not give a single vote.

This is not a case of "not conceding enough." It is like a person desperately raising the price while never once asking the other side what they actually wanted to buy.

In Han Feizi, The Difficulties of Persuasion, there is a line: The difficulty in persuasion lies in knowing the mind of the one being persuaded.

The reason CLARITY failed this time is that it failed on precisely this point.

I. The Political Dimension: This Is Not a Question of Vote Counts

49 votes in favor, 50 against—the 60-vote threshold was not reached; all 49 votes in favor came from Republicans, while Democrats and independent senators did not give a single one.

The House passed it in July 2025 by 294 to 134, and the Senate Banking Committee passed it in May 2026 by 15 to 9. After more than a year of negotiations, it stalled at the final procedural threshold.

There is a detail here that has been widely misread: Tillis of North Carolina switched his vote from in favor to against during the vote, not as a defection, but as a Senate procedural tactic—only by joining the majority side could he preserve the right to file a motion to reconsider later, and he filed that motion as soon as the vote ended. So the claim that "four Republicans bolted" is inaccurate. Excluding his tactical vote switch, it was still about 10 votes short of 60.

Republicans had always assumed that what the other side wanted was "stricter ethics provisions." So they kept raising their offer: prohibiting public officials from issuing or sponsoring digital assets, requiring the divestiture of significant financial interests, requiring disgorgement of profits and fines for violations, and removing the original sunset clause under which accountability would cease after the President leaves office.

In the new version of the text, the only entity that can directly bring a civil enforcement action against the President is still the Attorney General; state attorneys general are given only a limited entry point—they can sue only over the Attorney General's inaction, and once the competent ethics authority issues an opinion that "the conduct is not prohibited," even that path is closed off.

As an old saying goes, this is called using your own spear to pierce your own shield.

If a law is filled with prohibitions yet hands enforcement power to those close to the prohibited parties, then what it writes is not a set of prohibitions, but a procedure.

What the Democrats have always opposed is not the provisions, but the path. The former is a technical issue and can be discussed; the latter is a matter of trust and cannot be discussed.

Before the vote, Warren called this new set of provisions a "pale fig leaf." Her meaning was direct: no matter how detailed the restrictions written into it, as long as enforcement power remains with those who are restricted, it is merely decorative.

This is why 635 pages could not buy a single vote.

II. At the industry level: this is not "crypto lost"

The essence of the CLARITY Act is not "whether Bitcoin is legal," but whether on-chain dollars can be recognized by U.S. law as an operable clearing system.

This is also why traditional financial institutions are so attentive to it.

The strength of the U.S. dollar works the same way: it lies not only in the power to print money, but also in whether the world is willing to complete settlements within its network.

In the past, this network lived in bank accounts, correspondent banks, SWIFT messages and bank working hours. It is extremely mature, but it was not designed for the small-value, high-frequency, 24/7 global movement of funds in the internet era. What stablecoins actually do is make U.S. dollar assets transferable in real time in the manner of internet assets for the first time—USDC is strictly speaking not the U.S. dollar, but an on-chain U.S. dollar debt instrument backed by reserve assets and promising 1:1 redemption, closer to "an internet-native U.S. dollar money market fund share."

This is no longer a small market. As of September 2026, USDT had a circulating scale of approximately USD 183 billion, and USDC approximately USD 74 billion; Tether alone held more than USD 140 billion in U.S. Treasury bonds, more than many sovereign states. Its profits also come almost entirely from interest on these reserves—Circle's 2024 revenue was approximately USD 1.7 billion, 99% of which came from reserve interest, while it had to pay approximately USD 1 billion to distribution partners such as Coinbase.

For the United States, this is a new leg: the larger the scale of stablecoins, the greater the demand for short-term U.S. Treasuries behind them, and the broader the use cases for the U.S. dollar. What CLARITY seeks to do is fit this leg with its own legal skeleton—bringing issuance, reserves, disclosure and intermediary access all within the framework of U.S. domestic law.

That it did not succeed this time does not mean this leg will stop. The path has merely changed: from congressional legislation to regulators, the state level, and market participants' own compliance efforts.

Visa's stablecoin settlement pilot has already expanded to 9 blockchains, with annualized settlement volume reaching USD 7 billion; Stripe simply acquired the stablecoin infrastructure company Bridge.

None of these moves waited for CLARITY.

Viewing this as a game of chess makes it clearer: the failure of CLARITY reflects a temporary inability to reach agreement in U.S. domestic politics; meanwhile, the clearing network for on-chain dollars is advancing in another way.

III. At the regulatory level: stablecoins already have laws to follow

One easily overlooked fact must be stated here: the failure of CLARITY does not mean stablecoins have no rules in the United States.

In July 2025, the United States already signed the GENIUS Act, establishing a federal regulatory framework specifically for payment stablecoins. By 2026, the Treasury Department and the Office of the Comptroller of the Currency (OCC) are successively rolling out implementing rules, including an access pathway reserved for overseas issuers.

So the current state of the United States is split: stablecoins have laws, but market structure has not yet caught up.

What CLARITY seeks to resolve is another matter—whether a token counts as a security or a commodity, how intermediaries register, and where the boundary between the SEC and the CFTC is drawn. This matter remains unanswered to this day, and it is precisely the starting point of all litigation and enforcement disputes over the past few years.

XRP is the best reminder. The SEC v. Ripple case ended in August 2025 with both parties withdrawing their appeals, and Ripple paid a USD 125 million fine. The case ended, but the problem did not: the same asset, in institutional sales and secondary market transactions, may yield completely different legal conclusions. What CLARITY wanted to do was write this distinction into forward-looking rules—this time it did not succeed.

For Asian teams, another path is already open. Hong Kong issued its first batch of stablecoin issuer licenses in April 2026, granted to a joint venture led by HSBC and Standard Chartered; by August, the stablecoins of licensed institutions had already gone live. This is not a future plan, but a system already in operation.

As for mainland entities, the boundary has always been clear.

The 2021 ten-department notice already characterized virtual currency-related business activities as illegal financial activities; the February 2026 Yinfa [2026] No. 42 document further clarified how to handle several categories of situations, including RMB-pegged stablecoins, mainland entities controlling overseas entities to issue virtual currencies, and tokenization of real-world assets.

Therefore: for teams whose entity, clients, employees, revenue and expenditures are all within the territory, this round of bargaining in Washington has nothing to do with you; everyone should continue doing whatever they need to do.