Author: Jimi, Deep Tide TechFlow

Deep Tide Introduction: On September 15, the "Clarity Act" failed in a procedural vote in the Senate, with Bitcoin dropping below $75,000, leading to 120,000 liquidations worth $670 million, and market sentiment hitting rock bottom. However, the next day, two committees in the House of Representatives passed the "Bitcoin Strategic Reserve Act" and the "Digital Asset Tax Act." The former aims to lock up 328,000 bitcoins held by the U.S. government for 20 years, enshrined in law that cannot be revoked even with a change of president. The market priced in the short-term regulatory failure but has yet to price in the change in mid-to-long-term chip structure.

On September 15, the U.S. Senate conducted a procedural vote on the "Digital Asset Market Clarity Act," resulting in 49 votes in favor and 50 votes against, falling short by 11 votes of the 60 needed to advance. All Democratic senators plus a few Republicans voted against it. This market structure bill, lobbied for years and costing hundreds of millions, has become stalled less than two months before the midterm elections.

The market reacted that very day. Bitcoin fell more than 4%, briefly dropping below $75,000, marking its largest single-day decline since June. Ethereum dropped over 8%, Coinbase and Circle fell more than 10%, with nearly 120,000 liquidations within 24 hours, totaling $670 million. In prediction markets, the probability of the bill passing this year plummeted from 18% to 7%.

The bill got stuck on a point unrelated to crypto technology, the moral clause.

The Trump family reported about $1.4 billion in revenue from crypto business in 2025, and the amended bill only constrains the President, Vice President, and members of Congress and their spouses, excluding the children of the President. Democratic negotiator Gallego said before voting that Republicans are more concerned about ensuring the President can continue to profit rather than genuinely pushing for regulation.

While these were headlines for two days, on September 16, two things occurred that received little discussion.

The House Financial Services Committee passed the "U.S. Reserve Modernization Act" by a vote of 28 to 21, moving the strategic Bitcoin reserve from a presidential executive order to codified law for the first time. On the same day, the House Ways and Means Committee passed the "Digital Asset Tax Determination Act" by a vote of 38 to 5, exempting on-chain transactions under $10 from reporting, and taxes will only be applied when miners and stakers sell.

Neither of these events made it to trending topics, and their market impact operates on different time scales.

The failure of the Clarity Act determines the regulatory vacuum for the next few months. The Reserve Act addresses how the U.S. government disposes of its 328,000 bitcoins; once it changes from an executive order to law, this batch, accounting for about 1.5% of the circulating supply, will be locked for 20 years and cannot be revoked with a change of president. The former affects prices this quarter, while the latter could influence the chip structure for the next twenty years.

What has the Bitcoin Reserve Act changed?

First, let's look at what the U.S. government holds.

According to on-chain data, the federal government currently holds about 328,000 bitcoins, valued at about $25 billion at current prices, making it the largest single government holder of cryptocurrency on Earth. These coins almost all come from law enforcement confiscations: approximately 127,000 from the Prince Group case, about 94,600 from the Bitfinex hacker case, around 94,000 from Silk Road-related cases, with the remainder sourced from scattered enforcement actions by the Justice Department and the IRS.

In the past, the fate of these coins depended on who occupied the White House. Some governments auctioned them off, while others kept them dormant.

In March 2025, Trump signed an executive order to establish a strategic Bitcoin reserve, ceasing the auctioning of confiscated bitcoins and transferring them to long-term reserve holdings. But executive orders have a natural defect: the next president can overturn them with a stroke of a pen.

The "U.S. Reserve Modernization Act" aims to rectify this issue. The bill was jointly introduced by Republican Congressman Begich from Alaska and Democratic Congressman Golden from Maine, with several key provisions:

• The Treasury shall establish the strategic Bitcoin reserve within 180 days of the bill taking effect, and all federal agencies must report their total digital asset holdings within 60 days.
• The bitcoins entering the reserve must be locked for at least 20 years, and during this time cannot be sold, exchanged, auctioned, or mortgaged, the only exception being that the proceeds from sales may be used to pay federal debt.
• The Treasury shall publish reserve proof quarterly, using cryptographic methods to verify private key control, and shall be subject to independent third-party audits. Tokens confiscated apart from Bitcoin will enter a separate digital asset reserve with looser management rules, allowing for conversion into Bitcoin or liquidation to pay debts. The bill also specifies that the government cannot requisition privately held bitcoins to bolster the reserve.

Additionally, the bill requires the Treasury and the Department of Commerce to study budget-neutral methods for increasing holdings, avoiding new taxes, debt issuance, or deficits; pathways include disposing of other government digital assets, continuing law enforcement confiscations, and collaborating with private companies and state governments. An early discussion of a procurement target of "one million coins every five years" was not included in the formal text, leaving it as a research task.

Another type of favorable action

The Clarity Act has been discussed for nearly a year and a half from proposal to failed vote, absorbing hundreds of amendments, but ultimately fell due to partisan divides.

After the midterm elections, whether it can be revived and in what form remains unknown. Legislative actions of this kind are inherently difficult, requiring the appeasement of the banking industry, regulatory agencies, state governments, and bipartisan lawmakers.

The Reserve Act takes a different approach.

It does not redistribute regulatory power, does not offend the banking sector, and its core content merely formalizes what the government is already doing. The executive order has been in place for a year and a half, the reserve actually exists, and the bill addresses only its permanence issue. This is also why it gathered more than 20 bipartisan co-signatures.

The implications for the market are also entirely different. The success or failure of the Clarity Act would influence how exchanges register, which regulatory body tokens fall under, and these rule changes would take years to reflect in prices.

If the Reserve Act were to become law, the 328,000 bitcoins would exit potential selling pressure over 20 years; this change does not rely on the willingness of any institution to enforce it, and would take effect simply by being enshrined in law. Calculating based on circulating supply, this effectively pulls about 1.5% of the chips out of the market for a generation's time.

Another easily overlooked signal is that the required quarterly reserve proof and private key verification mean the U.S. government will publicly disclose its Bitcoin holdings for the first time in an auditable manner.

In contrast, the last comprehensive physical audit of the U.S. gold reserves was in 1953. A country's Bitcoin reserves being more transparent than its gold reserves is significant enough to be recorded in history.

The Tax Act, the part for ordinary people

The "Digital Asset Tax Determination Act," passed on the same day, received less attention but has more direct significance for everyday users. The fundraising committee's 38 to 5 vote result reflects a rare bipartisan consensus on crypto issues.

Some core aspects of the bill include exempting on-chain small transactions under $10 from reporting, so buying a coffee with crypto no longer requires calculating capital gains.

Tokens received by miners and stakers will only be taxed upon their sale, meaning users don't owe tax before the coins have been converted to cash. Compliant stablecoins also receive special treatment. Meanwhile, the bill extends wash sale rules to digital assets, invalidating tax avoidance strategies involving selling at a loss and repurchasing immediately; the Treasury estimates this could bring in about $23.5 billion over ten years. This revenue enhancement provision is what secures votes even from fiscally conservative lawmakers.

The tax rules represent one of the final hurdles for institutional funds to enter the market. Uncertain accounting handling makes corporate finance departments reluctant to engage with this asset class. This bill directly addresses such dry but critical issues.

However, currently, both of these bills have only passed in committee, marking only the first hurdle in the legislative process; further approvals by the full House of Representatives, Senate review, and presidential signature remain.

Congress is about to recess for the midterm elections, and the schedule will only become tighter upon reconvening. Predictive markets currently give the Reserve Act only a 6% probability of completing legislation before 2027. The corpse of the Clarity Act lies there, reminding everyone that any crypto legislation at Capitol Hill could flip at any moment.

Additionally, on the same day of September 16, the Federal Reserve raised interest rates by 25 basis points, the first increase since 2023, with dot plots suggesting another hike may occur this year. The combination of regulatory headwinds and tightened liquidity outlines the full picture of this downturn. The two bills passing through committee do not change interest rates, nor do they alter the wait-and-see attitude of institutional funds in the short term.

But stretching out the timeline, the narrative is clear. Executive orders can be rescinded at any time, but laws cannot. Short-term prices are dictated by interest rates and sentiment, while long-term chip structures are determined by law.