Why the Stalled CLARITY Act Puts Crypto’s Future at Risk
A leading crypto policy advocate warns that the failure to enact landmark legislation like the CLARITY Act is a critical missed opportunity. According to Peter Van Valkenburgh, executive director of the public policy research center Coin Center, rejecting statutory protections for developers in favor of short-term regulatory goodwill could set the stage for a severe future crackdown.
Van Valkenburgh articulated this concern in a recent post on X, arguing that the purpose of passing the CLARITY Act is not to accommodate the current, more industry-friendly administration. Instead, it is to create enduring legal constraints that bind future governments. “The point of passing CLARITY is not to trust this administration. It is to bind the next one,” he stated. Without such legislation, he cautions, the industry operates in a “world governed by prosecutorial discretion, political fashion, and fear.”
The CLARITY Act: A Legislative Overview and Its Stalled Path
The CLARITY Act (Clarity for Payment Stablecoin and Crypto Asset Markets Act) represents a comprehensive, bipartisan effort to establish a clear regulatory framework for digital assets in the United States. Its provisions include creating a registration regime for crypto intermediaries, defining when a digital asset is a security versus a commodity, and establishing a federal licensing system for stablecoin issuers. A related bill, the Blockchain Regulatory Certainty Act, would provide explicit protections for blockchain developers from money transmission laws when merely writing and publishing code.
However, the bill stalled in the Senate after key stakeholders—including banks, crypto firms, and lawmakers—failed to reach agreement on contentious issues. A major point of divergence was whether to permit stablecoin issuers to offer yield on customer holdings, a provision that created friction between traditional financial interests and certain crypto platforms. This legislative gridlock leaves the industry without the statutory certainty it sought.
Source: Peter Van Valkenburgh
The Gensler Precedent: Enforcement Over Rulemaking
Van Valkenburgh’s warning is rooted in recent history. During the previous administration, the U.S. Securities and Exchange Commission (SEC), led by Chair Gary Gensler, pursued an aggressive policy of regulation primarily through enforcement actions and legal settlements rather than through transparent, public rulemaking. This approach drew intense criticism from the crypto industry, which argued it created an unpredictable and hostile environment for innovation. The SEC’s actions against firms like Ripple, Coinbase, and others were seen as examples of this “regulation by enforcement” tactic.
A Fragile Calm and the Danger of Complacency
Since Gensler’s resignation on January 20, 2025, the SEC has signaled a shift. It has dismissed several long-standing enforcement cases and issued friendlier guidance suggesting a more nuanced approach to crypto asset regulation. This change in tone has fostered a sense of relief and optimism within the industry.
Van Valkenburgh cautions that this improved climate is temporary and rests on the discretion of the current administration. He argues that sacrificing the pursuit of permanent legislative safeguards for the sake of immediate, favorable treatment is a profound strategic error. “If we lose this moment because we thought we’d have a bit more revenue and a bit more latitude under the short-term friendly discretion of the current administration, then we lose our way,” he said. “We fail to stand up for the kind of transparency, neutrality, and openness that crypto stands for.”
He predicts specific future risks without a law like CLARITY: a future Department of Justice could revive aggressive prosecutions of privacy-tool developers as unlicensed money transmitters, and any existing interpretive guidance from agencies could be easily revoked by a subsequent leadership change.
The High Stakes of Inaction
The central thesis is that crypto’s long-term viability in the U.S. depends on codified rights, not on the benevolence of any single regulator or administration. The industry’s foundational ethos of decentralization and censorship resistance is fundamentally at odds with a system where its legal status is subject to the whims of prosecutorial discretion and political cycles. By failing to secure statutory protections now, the industry may inadvertently be “handing [the noose] to the future officials who will be only too happy to pull it tight,” Van Valkenburgh concluded.
The path forward requires the industry and its allies to resolve internal disagreements and prioritize the enactment of foundational legislation. The CLARITY Act’s failure in the Senate underscores the difficulty of this task, but the alternative—a return to an unpredictable enforcement-heavy regime—may prove far more costly.
