The CLARITY Act remains top of mind in the digital asset sector.
The CLARITY Act
“The larger issue is that the US still lacks a clear rule for when a digital asset is a security, when it is a commodity, and which regulator is responsible. This means companies are left to make case-by-case judgments before launching products. Any framework should regulate what a business actually does and the risks it creates. A company holding customer assets should not be treated the same as a developer publishing non-custodial software.
“The near-term probability is low, given the limited legislative calendar before the midterms. But I would not describe the issue as finished.CLARITY could return after the midterms, but its prospects will depend on the new balance of the Senate. Unless one party controls 60 seats, any version will still need support from both Republicans and Democrats. That means addressing the objections that stopped this bill, particularly political conflicts of interest and stablecoin rewards.”
– Renna Ba, director of partnerships, Morph
“The failure of the CLARITY Act was a setback for the U.S. digital asset industry, and the response from its leading Senate sponsor has made it worse. Sen. Cynthia Lummis has placed responsibility squarely on Democrats, arguing that opposition to President Trump ultimately outweighed the opportunity to advance market structure legislation before the midterms. Democrats have disputed that characterization, and the finger-pointing has now become the story.
“That framing is the problem. Market structure reform is a common-sense exercise: define which agency oversees which asset, set the rules for how intermediaries register and operate, and spell out how customer assets are protected. None of that is a referendum on a president. By treating the collapse as a partisan verdict rather than a legislative failure to fix, Lummis has turned the one digital asset bill that required broad, durable support into a loyalty test. A bill that needs votes from both parties does not pass by blaming one of them.
“The more important issue for markets is what happens when Congress cannot deliver the framework the industry has spent years waiting for. Part of the answer is already taking shape. The SEC and CFTC are moving on the areas they can reach through existing authority, and banks outside the United States are building their own digital asset infrastructure. The SEC’s Crypto Task Force is working on custody rules that would give broker-dealers and investment advisers clearer parameters for holding crypto assets, and Canada’s six largest banks are jointly exploring tokenized Canadian-dollar deposits for interbank payments.
“None of that is a substitute for law. The market has spent too long treating agency action as a serviceable stand-in for legislation. Rules, proposals and advisories are stopgaps: they can be narrowed, reinterpreted or reversed by the next commission, the next chair or the next court challenge, and institutions know it. A bank or asset manager committing multi-year capital to digital asset infrastructure needs statutory footing that survives an election cycle, not guidance that depends on who happens to be running an agency.
“The United States therefore faces a specific risk. Regulatory clarity arrives piece by piece while the rest of the world legislates and builds, and that piecemeal clarity gets mistaken for the legal certainty only Congress can provide. If long-term institutional adoption is going to happen in U.S. markets rather than around them, the CLARITY Act, or legislation that does the same job, has to pass. Everything below is a measure of how much the market is building in the meantime, and of how much more the United States would capture with a statute behind it.
– Ryan Kirkley, CEO, Global Settlement Network
ECB’s launch of Pontes and the next phase of tokenization
“The ECB’s launch of Pontes marks the growing shift of tokenization away from the fringes of financial markets and into the infrastructure that supports them.
“The bigger question now is what gets built on top of that infrastructure. Tokenized assets will need the same financial services that traditional assets have had for years, including payments, lending, and access to liquidity.
“For individuals, the opportunity is to make digital assets more useful. People should not have to sell an asset every time they need access to its value. Borrowing against assets you own is already well established in traditional finance, and we’re now starting to see that same principle take shape around digital assets.
“The real opportunity is to make digital assets work harder for the people who own them. Ownership should be the starting point, not the end of the journey.”
– Artem Ponomarev, founder and CEO, XPlace
Crypto investing
“The short squeeze explains how fast Bitcoin moved, not why. The more telling signal is where the fresh money is coming from. Nearly $1 billion went into US spot ETFs on Monday, yet stablecoin supply, the dollars crypto investors hold on-chain to buy with, hasn’t grown since May. The new capital is arriving through Wall Street, not through crypto markets directly. That makes this a narrower rally than the price suggests.”
“On our own rails, stablecoin volumes keep growing even though total supply has plateaued. The same dollars are being used more often, which shows adoption is real. But higher turnover isn’t the same as new money coming in.”
“I wouldn’t read this as a broad return of risk appetite. Bitcoin rallying through a rate hike, $100 oil, and elevated yields suggests some investors are treating it as a hedge against inflation, fiscal and geopolitical risk rather than as a bet on easy money. In emerging markets like Brazil, where oil shocks and higher US rates hit local currencies first, that logic is very familiar.
“One strong day of ETF inflows is a signal. A sustained run of them is a trend. The real test comes once the shorts have been cleared. If ETF demand holds and stablecoin supply starts growing again, the rally has a solid base. If ETFs remain the only engine, the move is vulnerable, and Bitcoin could give back a good part of these gains as positioning normalizes.
“Longer term, the more interesting shift is happening in emerging markets. Nearly all stablecoins today are pegged to the dollar, but local-currency stablecoins are on the rise. They give savers and businesses a direct bridge between their own currency and on-chain markets, without going through a US brokerage account. If that channel scales, the next wave of crypto demand won’t have to come from Wall Street alone.
“In the near term, the biggest risk is a Fed that keeps tightening to contain oil-driven inflation. Bitcoin can decouple from macro for a while, but not indefinitely.”
– Bernardo Brites, co-founder and CEO, Trace Finance
Crypto regulation
“The SEC’s next major move could be one of its most consequential, because custody is where the institutional conversation stops being theoretical.
“Taylor Lindman, chief counsel of the SEC’s Crypto Task Force, said the agency has a custody proposal under White House review covering investment firms and broker-dealers, with the broader objective of making existing securities intermediaries comfortable holding and transacting both security and non-security crypto assets. The SEC is also looking to clarify where investment advisers can custody client assets, including through structures such as state-chartered trusts.
“That sounds technical because it is technical, and it is exactly the kind of rulemaking the market needs. Institutions cannot participate at scale on the strength of broad political statements about supporting digital assets. They need to know who can hold an asset, where it can sit, what happens when it moves, how client assets are protected, and how the transaction ultimately settles.
“It is also worth being clear about what a custody rule is and is not. It is the SEC filling a gap Congress left open, using authority written for a different generation of markets. A rule can define custody for the intermediaries the SEC already supervises; it cannot settle which assets count as securities in the first place, or draw the jurisdictional line between the SEC and the CFTC that market structure legislation exists to draw. A future commission can revisit it, and a court can narrow it. That is the difference between a proposal under White House review and a statute on the books, and it is the difference institutions price when deciding how much to commit.
“Custody also cannot be solved in isolation. Once traditional financial institutions can hold tokenized securities and crypto assets more comfortably, the next questions come quickly: how those assets move between counterparties, what institutions use as cash or collateral on the other side of the transaction, and whether settlement infrastructure can operate at the same speed as the assets themselves.
“That is where the institutional digital asset market is heading now, and it is heading there with or without Washington.
“The CFTC’s warning around so-called ‘mention markets’ is another useful reminder that putting financial activity on new rails does not remove old market risks.
“The regulator has warned prediction platforms about contracts where the outcome depends on whether a named person says or does something, because that individual may be able to influence the result directly and the outcome may be difficult to verify independently. The CFTC has stopped short of banning these contracts, but its advisory makes clear that platforms will be expected to address the manipulation risks.
“It is also a case study in what stopgap regulation looks like in practice. An advisory sets expectations; it does not set rules. Platforms are left to interpret what addressing manipulation risk means, and the agency is left enforcing a standard it never wrote down as one. That is the posture regulators are pushed into when Congress has not defined the perimeter, and it is not a posture institutions can build a business on.
“This matters beyond prediction markets because the same principle applies across digital finance. Faster markets create enormous efficiencies, but speed without credible controls creates a different set of problems. If assets, collateral and payments can move around the clock, the infrastructure underneath those markets has to give institutions confidence that transactions are legitimate, counterparties are identifiable where required and settlement is final.
“Expect to hear far more about this as digital markets mature. The industry’s first phase was obsessed with access and liquidity. The next phase will be judged on whether that liquidity can move through infrastructure institutions actually trust, and on whether the rules governing it were written to last.
“That means compliance, transparency and settlement will matter as much as the assets sitting on top of the network.”
– Kirkley
Is Canada taking the lead on tokenization?
“The clearest signal this week may actually be coming from Canada, where Bank of Montreal, CIBC, National Bank of Canada, Royal Bank of Canada, Scotiabank and TD Bank Group are jointly exploring a system for tokenized Canadian-dollar deposits.
“The first phase is expected to focus on moving tokenized deposits between participating financial institutions, with the possibility of eventually connecting that infrastructure to other digital asset systems. Canada’s banking regulator also clarified earlier this month that tokenized deposits are not legally distinct from traditional deposits just because blockchain technology represents them.
“Note what made that possible. Canada’s regulator did not invent a new framework; it confirmed that an existing legal category still applies when the technology changes. That is the kind of clarification a supervisor can legitimately give, because the underlying law was never in doubt. The United States does not have that luxury for most digital assets, where the threshold question of what an asset is and which agency oversees it is precisely what Congress has failed to answer.
“That is why six of the country’s largest banks can now ask, out loud, what commercial bank money looks like when it can move through programmable, always-on infrastructure. It is a significant development, and the answer matters well beyond Canada.
“Banks are exploring tokenized deposits, stablecoins are expanding as a settlement asset, securities are moving on-chain, and regulators are working through how traditional intermediaries can custody digital assets. These developments converge on the same problem: financial assets can move faster than the infrastructure that historically connected them.
“For institutions, the question is how these different forms of money and assets communicate with one another. A tokenized deposit inside one banking network is useful. A stablecoin circulating across digital asset markets is useful. A tokenized security that can trade outside traditional market hours is useful. The real value arrives when institutions can move between those systems without creating another collection of disconnected liquidity pools.
“That is why the most important digital asset story right now is happening underneath the headlines about individual tokens and regulation.
“Several forms of regulated digital money are developing at the same time. Stablecoins are expanding globally, banks are testing tokenized deposits, securities are moving onto blockchain infrastructure, and regulators are figuring out how existing financial institutions can participate directly. Canada is also developing a federal framework for fiat-backed stablecoins, while its banking regulator has clarified the treatment of tokenized deposits, creating clearer lanes for two different forms of digital money to develop alongside each other. The industry now has to make sure those lanes eventually connect.
“Institutions will not want separate infrastructure for every tokenized deposit, stablecoin, security and blockchain network they use.
“Congress can delay legislation and regulators can spend months working through custody, market integrity and asset classifications, but capital will keep moving toward faster infrastructure because the economic case is already there. Canada’s largest banks exploring tokenized deposits makes that very clear. The open question is not whether that capital moves; it is whether it moves through U.S. institutions under U.S. law, or around them.
“Canada is instructive on this point too. It is pairing supervisory clarification with a federal framework: the regulator confirms what existing law already says, and the legislature writes the rest. Agencies can confirm; they cannot legislate. The longer Washington treats agency stopgaps as an adequate answer, and the longer the bill’s Senate sponsors treat a failed vote as an occasion for partisan blame rather than a reason to rewrite and return, the more of this construction lands on other jurisdictions’ legal foundations.
“The next phase will be about connecting these systems, giving institutions a common settlement layer across tokenized assets and digital money, and making sure liquidity can move as quickly as the markets it serves. Whoever solves that piece will sit much closer to the center of the financial system than the edge of the crypto market. The United States can still be where that happens, but only with a statute behind it.”
– Kirkley