SEC launches equity rules after Senate kills Clarity Act
- The Senate killed the Clarity Act after Democrats blocked procedural cloture over presidential crypto ethics exemptions.
- SEC Chair Paul Atkins bypassed Congress, issuing an Innovation Exemption for tokenized stock trading on decentralized platforms.
- Regulators and prosecutors escalated enforcement against non-custodial developers and peer-to-peer trading desks worldwide.
Legislative oversight for digital assets just collapsed.
The US Senate killed the Clarity Act in a 49-50 procedural vote, missing the 60-vote threshold to establish a federal framework. Senator Elizabeth Warren led Democratic opposition, targeting ethics provisions that allowed waivers for President Donald Trump’s commercial crypto ties while shielding top officials from state lawsuits. Republican Senator Cynthia Lummis warned the defeat leaves no path for statutory market legislation for the rest of the decade.
Lawmakers also stripped explicit Section 1960 protections for non-custodial software developers right before the vote. On Ungovernable Misfits, Foundation customer experience head Q&A emphasized that removing this shield exposes self-custodial software creators to the same federal money-transmitter charges leveled against Tornado Cash and Samourai Wallet. Without statutory boundaries, administrative enforcement becomes the sole ruleset.
Regulators did not wait for the dust to settle. On September 17th, hours after the vote failed, SEC Chair Paul Atkins activated an executive pivot, issuing an Innovation Exemption for tokenized equities. On Bankless, David Hoffman explained that the rule allows decentralized exchanges to host whitelisted stocks with voting rights without registering as broker-dealers, provided platforms enforce KYC and respect a 0.25 percent daily volume cap per asset.
The administrative strategy carries structural flaws. Bernstein analyst Zoltan Vardai noted that both the SEC and CFTC are accelerating unilateral rulemaking, but host David Bennett pointed out on Bitcoin And that agency rules can be instantly unwound when presidential administrations change. Within 48 hours of the Senate vote, the CFTC submitted its own regulatory proposal to the White House to grab spot-market jurisdiction.
Financial markets greeted the regulatory chaos with unexpected resilience. Fed Chair Kevin Warsh pushed through a unanimous rate hike to 4 percent, yet crypto prices held firm, with Zcash breaking $1,500. On Bankless, Ryan Sean Adams noted that prices holding steady against both rate hikes and dead legislation signals underlying market strength.
Agencies are running the market now, but administrative mandates built on shifting political sands make terrible concrete.
Source Intelligence
- Deep dive into what was said in the episodes
Breach Season Continues | THE BITCOIN BRIEF 91 • Sep 21
- The United States Senate blocked the Clarity Act in a forty-nine to fifty vote, falling short of the sixty votes required to advance the market structure bill. Senator Lummis warned the defeat leaves no realistic path for similar legislation this decade.
- The final text of the failed Clarity Act dropped explicit criminal protections for non-custodial developers under Section 1960 unlicensed money transmitting laws. The omission leaves self-custody software developers exposed to the same charges brought against Tornado Cash.
- Following the Clarity Act defeat, the Commodity Futures Trading Commission submitted a rulemaking proposal titled Regulation Crypto Asset Transactions to the White House. The agency also expanded relief allowing passive trading software to bypass broker registration requirements.
- British authorities raided three unregistered peer-to-peer trading operations in London as part of an escalating crackdown. The Financial Conduct Authority stated that zero peer-to-peer crypto businesses are currently registered in the United Kingdom.
Also discussed on this episode: (9)
Custody (1)
- Foundation released legacy mode for the Passport Prime hardware wallet, allowing users to migrate alternative coins using ported ledger applications. This open-source feature allows users to load external apps onto KeyOS without compromising the core operating system.
Privacy (4)
- Peer-to-peer marketplace Hodl Hodl implemented and then immediately disabled an automated transaction risk scoring system after intense user backlash. Privacy advocates argued the compliance-driven system would inevitably flag legitimate users of privacy-preserving tools like coinjoins.
- Attackers leaked KYC data stolen from Revolut's Lithuanian branch using a compromised Italian government email address to impersonate law enforcement. The extortionists targeted six hundred eighty high-value crypto accounts and demanded a ransom.
- Signal introduced a beta feature on Android allowing users to register accounts using a one-time fee instead of a phone number. The system uses zero-knowledge proofs to decouple Google Play payments from the generated accounts.
- A newly disclosed zero-click cellular baseband vulnerability affected Google Pixel devices, granting attackers system-level bypass capabilities. GrapheneOS developers successfully integrated the necessary baseband vendor patches into their mid-September operating system release.
Nation-State (1)
- An investigation by Lola Leets suggests the United States strategic Bitcoin reserve may currently exist only on paper. The House Financial Services Committee advanced the ARMA bill, ordering agencies to hold seized coins until the reserve is fully certified.
Protocol (1)
- The Liquid network remains roughly six hundred Bitcoin short following a security incident, with peg-outs to on-chain Bitcoin remaining paused. Blockstream stated that redemptions will not resume until the one-to-one asset backing is verified and audited.
Lightning (2)
- Core Lightning developers urged operators to disable the experimental dual-funded channel feature after attackers successfully drained node liquidity offline. The exploit allowed peers to open channels containing ten times the actual locked funds.
- Lightning Labs developer Roast Beef proposed a Bolt 11 spec modification to reject invoices containing duplicate payment hashes. The proposal follows a peer-to-peer trading bot exploit caused by differing library parsing behaviors.
ROLLUP: The Bull Market Test | Clarity Dies | SEC Opens the Door | Hyperliquid Comes Onshore • Sep 18
- The Senate blocked the Clarity Act after a procedural vote fell 11 votes short of a supermajority. Ryan Sean Adams notes that Donald Trump's controversial history of family crypto dealings made the bill politically impossible for Democrats to support.
- The SEC issued its Innovation Exemption on September 17th, permitting whitelisted tokenized stocks with voting rights to trade on public blockchains. The exemption bypasses broker-dealer registration for decentralized exchanges but imposes a daily trading volume cap of 0.25 percent.
Also discussed on this episode: (8)
Markets (4)
- David Hoffman argues the market's positive price reaction despite double bearish news confirms crypto is in a bull market. Historically, insensitivity to negative events like rate hikes and legislative failures is a classic indicator of early cycle momentum.
- Zcash and Near Protocol are driving a middle-market recovery, which Ryan Sean Adams notes is abnormal for early bull phases. Near Protocol has seen significant adoption, with its confidential intents facilitating 30 billion dollars in cross-chain transactions.
- Tom Lee forecasts a major year-end stock market rally, predicting the S&P 500 could easily clear 8,200. Meanwhile, the bond market remains highly volatile as the US 10-year treasury yield surpassed 5 percent.
- Nick from Derive argues that on-chain options are gaining traction over perpetual swaps because they protect traders from volatility-induced liquidations. The Derive token reacted strongly to this trend, surging 150 percent over the past month.
BTC Markets (1)
- Michael Nadeau identifies a critical Bitcoin trading band between 69,900 and 80,400 dollars. Sustaining prices above the 50 week moving average of 80,400 dollars will provide decisive momentum confirmation that the market low occurred on June 30th.
Fed (1)
- Fed Chair Kevin Warsh led a unanimous 12 to 0 vote to raise interest rates to a target range of 3.75 percent to 4 percent. Haseeb Qureshi argues that the hike, which defied political pressure, demonstrates the central bank's sovereignty.
AI Infrastructure (1)
- Eric Voorhees highlighted massive growth on Venice, where daily AI token consumption has reached 250 billion. Venice uses 25 percent of its transaction fees to buy back its native VVV token, aligning value accrual with protocol utilization.
VC (1)
- S&P Global acquired smart contract security auditor OpenZeppelin. S&P Global is targeting Web3 infrastructure, directly absorbing a firm responsible for securing 37 trillion dollars in historically transferred blockchain value.
No Clarity | Bitcoin News • Sep 16
- The U.S. Senate blocked the Digital Asset Market Clarity Act in a 49-50 cloture vote, falling short of the 60 votes required to advance the regulatory framework. Pro-crypto lawmakers accuse Democrats of stalling the bill over ethics concerns.
- Democrats, led by Senator Elizabeth Warren, blocked the Clarity Act over allegations that the ethics provisions failed to address President Donald Trump's crypto assets. Republican Senator Cynthia Lummis rejected a Democratic counter-offer requiring officials to sell rather than shield assets.
- Bernstein analysts project aggressive, immediate rulemaking from the SEC and CFTC to compensate for the failed Clarity Act. Because these agency rules lack the permanence of legislation, David Bennett notes they remain vulnerable to being overturned by future administrations.
- Prior to the vote, SEC Chair Paul Atkins stated readiness to issue regulations if the Clarity Act failed. This follows an August 19 SEC proposal allowing crypto projects to raise up to $75 million over 12 months with temporary safe harbor status.
Also discussed on this episode: (5)
Fed (1)
- Markets are pricing in a 92.5 percent probability of a quarter-point Federal Reserve rate hike. While David Bennett argues a hike is reckless given the $41 trillion national debt, Chris Sullivan warns a surprise hold would shock unprepared investors.
Stablecoins (1)
- Talos analyst Cooper Duchene reports a 28 percent net buying tilt toward stablecoins ahead of the Fed meeting, deviating from the typical 8 percent selling average. Bitcoin buying conviction dropped to 3 percent as traders moved defensive capital to the sidelines.
Energy (1)
- Crude oil has surged over 20 percent in five days, complicating Federal Reserve monetary policy. Mark Connors argues that raising interest rates is ineffective against supply-side energy shocks, comparing the Fed's strategy to using a pitchfork to bail out a boat.
Custody (2)
- Hardware wallet manufacturer BitBox is integrating a Lightning hot wallet into its mobile application using the Breeze SDK. The implementation derives the Lightning wallet directly from the user's existing seed phrase without requiring a new backup.
- Deutsche Bank plans to launch institutional digital asset custody in Europe by 2026, partnering with Taurus and BitPanda. The service will initially support Bitcoin, Ether, and stablecoins including USDC, EURC, and EURAU, pending final regulatory approval.
CLARITY Week | Bitcoin News • Sep 15
- Senator Cynthia Lummis praised Donald Trump for agreeing to strict federal ethics rules in the Clarity Act. The legislation faces a critical Senate procedural vote but remains contested by Democrats who want state attorneys general to have direct power to sue the US president.
- Multiple interest groups are lobbying against the current draft of the Clarity Act. The Indian Gaming Association opposes limits on prediction markets, state attorneys general cite restrictions on scam enforcement, and major banking lobbies demand changes to stablecoin yield language.
Also discussed on this episode: (6)
Regulation (2)
- The US House Ways and Means Committee is evaluating a 114-page crypto tax package, the Digital Asset Tax Certainty Act. The bill excludes a highly anticipated provision that would have deferred taxation on mining and staking rewards until the assets are sold.
- The US Department of Justice filed a civil forfeiture complaint to seize $61 million in cryptocurrency linked to illicit Iranian oil sales. Prosecutors claim Chinese firms Blessed Trust and Hexawale laundered these black-market funds using Binance trading accounts.
BTC Markets (1)
- MicroStrategy repurchased over 1.4 million shares of its STRC preferred stock for $139.3 million during the week of September 13. The company left its treasury holdings unchanged at 845,050 Bitcoin for the second consecutive week.
Protocol (1)
- The Spaces Protocol is now live, introducing a native naming protocol for the Bitcoin network. The system anchors trust directly to the Bitcoin blockchain while keeping the actual naming registry database off-chain to minimize footprint.
Payments (1)
- Non-custodial payment processor Swiss Bitcoin Pay temporarily shut down its servers following a data breach that leaked customer emails, Bitcoin addresses, and IBANs. This event follows recent security breaches at both Revolut and hardware wallet manufacturer Trezor.
Safety (1)
- OpenAI CEO Sam Altman warns that AI developers must implement stricter safety guidelines and pace deployments to prevent humanity from losing control of advanced models. Altman advocates for industry-shared standards and government coordination to prevent extreme power concentration.