Written by: Xiao Bing

On the evening of August 11, the SEC announced: this Friday (August 14) at 10 AM, the committee will hold a public meeting with only one agenda item: to vote on whether to formally propose a "customized issuance system" for crypto asset investment contracts (Regulation Crypto).

This is the first formal rule-making for crypto since Paul Atkins took office as SEC chair, and the announcement left only three working days from release to meeting.

All three commissioners are Republicans, and approval of this step is expected. However, it should be clarified: the vote on Friday is to decide "whether to issue a proposal and solicit public opinion," not the final rule. After the proposal is announced, there is usually a 60 to 90-day public comment period, and after the SEC makes revisions based on feedback, the fastest it could take effect would be 2027.

For the market, signals are more important than schedules.

Where is the CLARITY Act stuck?

The backdrop is a legislative stalemate in Congress.

The CLARITY Act (Digital Asset Market Clear Act) is currently the closest legislation to becoming law regarding crypto market structure in the U.S. The House passed it in July 2025 with a vote of 294:134, and the Senate Banking Committee approved it in May this year with a vote of 15:9. It seemed to be smooth sailing, but it got stuck at the Senate floor vote stage.

Senate Majority Leader Thune initially planned to push for a vote before the August recess. On August 6, he told reporters that Democrats insisted on not voting. At 4:52 AM on August 8, Thune submitted a procedural motion during the end of an all-night meeting, pushing the vote to September 15 at 2:15 PM, the first day senators would return from recess.

The reasons for getting stuck are quite specific. Three contentious points remain unresolved: the details of anti-money laundering and law enforcement provisions, the regulatory jurisdiction of stablecoin yields, and government ethics provisions regarding presidential holdings of crypto assets. Elizabeth Warren's attitude represents the opposition within the Democratic Party; she said this version of the bill "was written by the crypto industry and serves the crypto industry."

A total of 60 votes are needed for approval. The Republicans hold 53 seats, so at least 7 Democrats need to cross party lines to vote. TD Cowen analyst Jaret Seiberg gave a 75% failure probability in his research report on August 10. The odds of the CLARITY Act being signed into law this year on Polymarket fell from 82% in February to 21%, with more than $5.5 million bet on this outcome.

SEC Filling the Gap

The SEC's actions followed closely after the CLARITY Act hit a roadblock. The SEC is not waiting for Congress; it is writing the rules itself. TD Cowen characterized this meeting as "the starting point for the SEC to initiate a series of rule-making to provide regulatory clarity after the Senate was stalled."

The framework for Regulation Crypto is based on Atkins' public speech in March. At that time, he proposed three categories of exemptions:

Startup exemption: allowing early crypto projects to conduct limited financing under specific conditions without triggering full securities registration obligations. The reference figure used by Atkins in March was no more than $75 million within 12 months.

Financing exemption: providing a simplified path for larger fundraising, with disclosure potentially closer to the format of crypto white papers rather than the full S-1 prospectus of public companies.

Investment contract safe harbor: this is the most critical part, possibly providing a path for tokens to "exit securities regulation": when a project's development team no longer continues to lead network operations, tokens may no longer be treated as investment contracts, thus falling outside SEC jurisdiction.

If the safe harbor provisions are incorporated into the formal rules, it will fundamentally change the compliance logic for crypto projects. The core issue in the past has been: once a token is identified as a security, it is permanently a security, and the project team must indefinitely bear the obligations of securities law. The logic of the safe harbor is that the security attributes can diminish as the project's decentralization increases.

Two Tracks

There are now two parallel tracks advancing crypto regulation in Washington.

The CLARITY Act is on the legislative track. Its advantages include the highest authority (law supersedes administrative rules), the widest coverage (simultaneously delineating the jurisdictions of the SEC and CFTC), and the greatest durability. However, it requires 60 votes, needs bipartisan support, and must resolve three contentious points. Even if the procedural vote passes on September 15, there will still be debates, amendments, and final votes, making the window for completing the entire process this year extremely narrow.

Regulation Crypto is on the administrative rule track. It does not require a congressional vote, and the three Republican commissioners are sufficient to drive it forward. Once the formal rules are passed, they are harder for the next SEC to easily overturn than staff statements, as overturning formal rules requires undergoing the same notice-comment-vote process. The disadvantage is that its authority is limited, covering only the SEC's jurisdiction without involving the CFTC, and may face legal challenges.

Former SEC official Brett Redfearn's response on X represents industry sentiment well: "No need to wait for Congress to pass the CLARITY Act anymore! It’s time for the regulators to take action themselves."

The two tracks are not mutually exclusive. If the CLARITY Act ultimately passes, it will replace Regulation Crypto; if CLARITY fails in Congress, Regulation Crypto will be the best outcome the industry can achieve. The SEC is using administrative authority to provide a fallback plan for Congress.

For the crypto industry, there will be no changes in compliance obligations in the short term. Friday's vote is just the starting point of the rule-making process, and it will take at least six months from proposal to final effect.

However, the impact at the signal level is immediate. Over the past year, the biggest uncertainty faced by the crypto industry in the U.S. has been "when the rules will actually come." With Congress and the SEC moving forward simultaneously, even if their progress differs, it at least means that Washington has shifted from the debate of "whether to regulate crypto" to the practical phase of "how to regulate."

September 15 and August 14, two dates, two tracks, one direction.