Bitwise: CLARITY Act Support Wavers, Crypto Industry Faces Critical "Fork in the Road"

Odaily News According to a recent blog post by crypto asset management firm Bitwise, as the U.S. "Clarity for Digital Assets Act" (CLARITY Act) faces hurdles in its congressional advancement, the crypto industry is at a critical juncture. Short-term trends may shift from a speculative bull market to a more challenging "show me the results" phase.

Matt Hougan, Chief Investment Officer at Bitwise, pointed out that the CLARITY Act is crucial for "solidifying" the current relatively friendly crypto regulatory environment into a long-term legal framework. Without clear federal legislation, the crypto industry will remain exposed to the risks of future government policy shifts. Market expectations for the bill's passage have cooled significantly recently, with related probabilities on Polymarket dropping from around 80% at the beginning of the year to approximately 50%. Coinbase CEO Brian Armstrong has also publicly stated that he has withdrawn his support for the bill because the current draft could harm consumer interests and stifle competition.

Hougan believes that if legislative progress continues to stall, the crypto industry may need to follow the example of disruptive companies like Uber and Airbnb, which grew in regulatory gray areas. The goal would be to make stablecoins and tokenized assets "indispensable" infrastructure within the U.S. economy over the next roughly three years. If successful, regulation would eventually be forced to catch up; if large-scale adoption fails to materialize, future political environment changes could severely impact the industry.

Regarding market impact, Bitwise outlines two potential paths: If the CLARITY Act passes in a workable version, the market could quickly price in expectations for a certain expansion of blockchain finance, driving significant price increases. Conversely, if the legislation fails, the market may enter a wait-and-see period, with valuations suppressed by regulatory uncertainty, and returns becoming more dependent on real-world application adoption.

Wall Street institution Benchmark also noted that legislative setbacks would delay, not end, the crypto industry's maturation process. The U.S. market might operate below its potential for a period, with capital showing a preference for Bitcoin-related exposure, companies with robust balance sheets and cash flow, and infrastructure plays, while remaining cautious towards regulation-sensitive areas like exchanges, DeFi, and altcoins. (CoinDesk)