Matt Hougan said the bill’s failure could unsettle markets briefly, but clearer odds may remove uncertainty and support a fall rally.
Bitwise Chief Investment Officer Matt Hougan said the CLARITY Act could fail to pass this week, but that would not mean the end of the legislation or the crypto industry’s progress.
The US Senate is scheduled to leave for its August recess on Friday, August 7, and return on September 14. Under Senate rules, lawmakers must file for cloture on the CLARITY Act by Wednesday, August 5, for the bill to have a chance of receiving a vote before the recess.
Crypto Without Clarity
A failure this week would also not necessarily end the act. Hougan expects the legislation to enter a “walking dead” state. That could lead to fresh efforts to pass it in September or during a December lame-duck session. Congress often combines several measures into year-end omnibus legislation, and creates another possible route for the bill.
For Hougan, the bigger issue with that uncertainty is its effect on investors. Some professional investors are holding back from crypto because they do not want to commit capital while the outcome of CLARITY remains unclear. They may wait to see whether the legislation passes or fails and how markets respond.
If the bill does not pass this week, Hougan said a sharp drop in its Polymarket odds could actually help remove that uncertainty. He said the market may wobble initially, but a clearer outcome could leave crypto better positioned for a rally in the fall.
The Bitwise exec sees the Securities and Exchange Commission (SEC) as another potential path for the industry. Chair Paul Atkins recently said the agency is ready and able to introduce rules addressing the same issues covered by CLARITY. Hougan said these rules may be more supportive of crypto and innovation in the short term than a bipartisan congressional bill. The risk, he explained, is that a future administration could appoint a less supportive SEC chair and reverse those policies.
Despite this, Hougan noted that crypto has already built too much momentum for a future regulator to stop its progress. He cited BlackRock’s Bitcoin ETF, efforts by Nasdaq and JPMorgan to tokenize assets, and work by Visa, Mastercard, Stripe and Coinbase on a stablecoin platform. He also pointed to Robinhood’s blockchain, which connects with DeFi applications including Uniswap and Morpho.
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The industry is also gaining a stronger position within the US banking system. For instance, the Office of the Comptroller of the Currency has granted trust charters to Circle, Ripple, Paxos and other firms. Outside the US, governments including those in the European Union, Japan and Russia are also pursuing pro-crypto legislation.
The exec said the situation resembles the early development of the internet. Congress failed to advance major telecom reform in 1994, but the internet continued to expand. Netscape, Amazon and eBay emerged, and the number of websites grew rapidly. Congress eventually passed the Telecommunications Act of 1996.
Long-Term Impact
Hougan’s argument comes as other crypto industry figures have also highlighted the wider regulatory impact they believe CLARITY could have. Andreessen Horowitz’s Chris Dixon, for instance, recently said that the bill could help prevent another FTX by giving regulators clearer oversight of crypto exchanges and establishing rules around disclosure, fraud and insider trading.
Dixon said that the market outside stablecoins, which he estimated at around 85% of the market, still lacks a comprehensive federal regulatory framework. Additionally, major banks and fintech firms are now moving beyond experiments, with significant blockchain deployments already live or expected to launch.
While agencies such as the SEC and the CFTC can address many issues, if CLARITY does not pass, Dixon added that legislation offers more lasting rules and gives businesses greater confidence to make long-term investments.
