Written by: Matt Hougan, Chief Investment Officer of Bitwise

Compiled by: Chopper, Foresight News

If you are like me and have heard enough discussions about the "CLARITY Act." To be fair, the U.S. Congress should pass this bill, as its implementation would benefit the cryptocurrency industry. The "CLARITY Act" is not perfect, but it is still a reasonably good piece of legislation. It can boost the U.S. economy, protect investors, improve ethical safeguards, and help the U.S. gain a competitive advantage in the age of on-chain finance.

However, this landmark cryptocurrency legislation has been going through the Congressional review process since May 2025. Its origins can be traced back to the earlier FIT21 bill, which was passed in the U.S. House of Representatives in May 2024, making it 804 days ago.

In the past few months, many people, including myself, have seen this week as a critical juncture for the success or failure of the "CLARITY Act." The reason is that the U.S. Senate will begin its August recess on Friday, August 7, and will not reconvene until September 14. According to Senate rules, in order to vote before the recess, senators must submit a motion to end debate by no later than Wednesday, August 5.

The mainstream view is that if Congress cannot vote on the bill before the August recess, the bill is likely to die, and lawmakers will quickly shift their focus to the November elections. Polymarket predicts that the probability of the bill being passed in 2026 is only 27%, down from as high as 82% in February of this year.

The best scenario for the cryptocurrency industry is that the "CLARITY Act" passes smoothly. If that happens, I expect a new bull market to emerge in the cryptocurrency market. However, considering the low probability of this outcome, I will outline the situations the market will face if the bill does not pass.

First, the bill will not truly disappear

To start with the bad news, even if the "CLARITY Act" fails to advance this week, this won't settle the matter. The bill will enter a "zombie state," neither being completely repealed nor easily advanced.

As the August deadline approaches, rumors have already begun suggesting that the bill might be voted on in September. There are even suggestions to delay it until December, which is during the lame duck session of Congress (note: the lame duck session refers to the period after the U.S. November elections and before new members of Congress officially take office on January 3, during which the outgoing Congress continues to meet). The U.S. Congress often packages several bills into an omnibus appropriations bill at the end of the year, forcing lawmakers to vote on a bundle of proposals that include provisions they support and oppose. Some hope that the "CLARITY Act" can find a way through this method. After the Wednesday deadline, we can expect ongoing reports discussing the possibility of "sneaking in" the bill this fall and winter.

The negative impact of this is that the uncertainty brought by the bill has kept many professional institutional investors on the sidelines. They do not want to invest in cryptocurrency assets only to face a failed bill and a subsequent market downturn. Institutions prefer to wait until the situation clarifies before taking action.

If the bill fails this week, the most favorable scenario is that the probability of the bill passing on Polymarket further drops, at least to the low teens. If this happens, the market may experience temporary volatility but will be prepared for a rebound in the fall.

Second, the cryptocurrency industry will continue to move forward

More importantly, the cryptocurrency industry itself will not be dealt a fatal blow.

Even if the "CLARITY Act" fails to be implemented, the industry will find its way. Last week, SEC Chairman Paul Atkins made this very clear in an interview with CNBC. He stated that the SEC "is ready, willing, and able to introduce regulatory rules to address the same issues as the CLARITY Act."

There are pros and cons to this situation. In the short term, regulatory rules from the SEC under Atkins are likely to be more favorable to the cryptocurrency industry and innovation compared to a bill born from bipartisan negotiations in Congress, and could even serve as a catalyst for the industry. However, the risk lies in the possibility of a future government appointing an SEC chair with an unfavorable stance who might overturn these rules.

Even so, I believe that it will be difficult for any future SEC chair to reverse the overall momentum of the cryptocurrency industry. The industry is moving forward rapidly, with financial operations transitioning onto the chain. BlackRock's most profitable ETF is the Bitcoin ETF; giants like Nasdaq and JPMorgan are actively promoting asset tokenization; Visa, MasterCard, Stripe, and Coinbase are collaborating to launch stablecoin platforms; Robinhood has already launched its own blockchain, compatible with DeFi applications like Uniswap and Morpho.

Meanwhile, cryptocurrency companies are integrating into the U.S. federal banking system, with the Office of the Comptroller of the Currency (OCC) granting trust charters to Circle, Ripple, Paxos, and an increasing number of companies. Countries and regions around the world, including the EU, Japan, and even Russia, are rushing to introduce favorable laws for the cryptocurrency industry.

The box is already opened, and it cannot be closed again

Assuming the "CLARITY Act" fails and is replaced by regulatory rules from the SEC, the cryptocurrency industry will still have at least two and a half years of development window until a new government may potentially appoint a new SEC chair. By that time, no matter who the SEC chair is, it will be impossible to reclose the "box" that has already been opened.

The reality is that Washington is always sluggish in responding to significant technological changes, and the actual impact is often not as severe as people expect. In 1994, the House of Representatives passed a large telecommunications reform bill by a landslide vote of 423 to 4, but the bill was ultimately shelved in the Senate and did not reach a full vote. Does that sound familiar? Yet the internet did not wait. In the next two years, Netscape launched and went public, Amazon and eBay were founded, and the number of websites grew exponentially. Congress eventually caught up, and in 1996, the Telecommunications Act passed the Senate by an overwhelming margin of 91 to 5, laying the foundation for decades of industry growth. Looking back, the two-year delay in policy did not genuinely slow down industry development.

The governance efficiency of Washington is not satisfactory. It is absurd to see that while a bill can be implemented to protect investors and incentivize innovation, it still has not materialized. But this issue cannot be used to judge whether cryptocurrency assets deserve to be part of the global financial infrastructure. The integration of cryptocurrency into finance is already a fait accompli. To this day, the cryptocurrency industry has built up enough momentum, and regardless of the results of Congress in the coming days, it will reshuffle the entire financial system in the coming decades.