The Clarity Act Is on Hold, but the SEC Is Picking Up the Slack. Here's the Latest Outlook on Crypto Regulation.

The Securities and Exchange Commission (SEC) proposed its first permanent digital-asset rule to govern the crypto industry on Aug. 18, and the next day, President Donald Trump held the chief executives of the industry's biggest companies, specifically Coinbase Global, Ripple -- with its XRP (CRYPTO: XRP) -- and Robinhood Markets, at the White House for a summit. That gathering came on the heels of the Senate leaving town on Aug. 8 without voting on the Clarity Act, which many had assumed would lead to the bill's chances of passage in 2026 becoming very slim.

In some sense, the summit might even have been a response to the sluggishness of Congress. White House crypto advisor Patrick Witt claimed that regulators in the executive agencies -- specifically the SEC and the Commodity Futures Trading Commission (CFTC) -- will "break glass" (i.e., use emergency mechanisms) if Congress didn't deliver on the Clarity Act. That could be imminent, so let's break down what's happening with crypto regulation outside of what's being debated in the Capitol.

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Rules aren't laws, but companies would probably still obey them

There have recently been a slew of rulemaking and policymaking attempts by the SEC and CFTC, starting in March, when the two agencies jointly published their new interpretation of existing laws.

That guidance sorted 18 crypto assets as digital commodities beyond the SEC's reach, including the crypto majors, Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO: ETH), XRP, and Solana (CRYPTO: SOL). Each coin's primary regulator is now determined by the category it was placed in. But a future commission can withdraw that entire scheme with a memo because such legal interpretations aren't carved in stone.

The new rule proposed in August pertains to using crypto tokens as a mechanism for businesses to raise capital.

It would exempt token sales of up to $5 million over four years from registration under the Securities Act of 1933, which is the requirement to file a registration statement with the SEC and have it cleared before offerings. A similar exemption would cover token sales of up to $75 million a year, on the condition that the issuer provides financial statements, audited above certain capital-raising thresholds, along with ongoing reporting.

Importantly, under the rules, a token would also be entitled to shed its status as a security if its issuer ended any managerial work related to the token, so it's now feasible that a project could be regulated by different agencies at different parts of its lifespan.

But again, while a regulatory rule can continue to be in force after the chairperson who wrote it departs the agency, it can still be repealed by a future chair or by a court. So there's still not much of a substitute for a law that codifies the above. And SEC Chairman Paul Atkins himself said that actual legislation "remains indispensable" to creating rules that are durable enough to last through future administrations that may take an opposite approach to regulating crypto.

What's the takeaway?

Actually, the newly proposed rules do not mean much for the crypto majors directly. The proposed exemptions are not relevant to them since those coins are already distributed and trading, so a new offering exemption has no application to them now.

In the long term, there's still an argument for how the proposals, if implemented, would be bullish for the majors, not to mention the future of cryptocurrency more generally.

If there's regulatory clarity, it would clear the way for financial institutions to underwrite legal risks of crypto investments instead of pricing them as unknowns, which would likely lead to significantly more inflows into those assets over time. The crypto-focused financial institutions are still waiting on their permission slip to participate, and even if it's preferable for them to get it in the form of a freshly signed law, a set of uncontroversial regulatory frameworks would be a lot better than nothing at all, and it's possible that the crypto market will get both within the next 12 months.

The next date to watch is Sept. 15, when a procedural vote for the Clarity Act in the Senate needs to clear a bar of 60 senators to proceed. Realistically, that means six Democrats must cross party lines to vote in favor of the bill. If it happens, it'll boost the market significantly, to say the least.

Alex Carchidi has positions in Bitcoin, Ethereum, and Solana. The Motley Fool has positions in and recommends Bitcoin, Ethereum, Solana, and XRP. The Motley Fool recommends Coinbase Global. The Motley Fool has a disclosure policy.