Bitwise’s Matt Hougan Says Crypto Rally Benefits From CLARITY Act Failure

Bitwise CIO Matt Hougan discusses the crypto market rally following the failure of the CLARITY Act and its impact on stablecoin rewards and exchanges.

Crypto prices rallied after the U.S. Senate failed to advance the CLARITY Act, and Bitwise Chief Investment Officer Matt Hougan argues the legislation’s collapse removed restrictions that would have affected exchanges and stablecoin rewards.

In a Sept. 30 analysis, Hougan said the crypto market had traded higher since the vote despite the industry previously supporting the legislation. He attributed the reaction in part to regulatory actions that followed the bill’s failure and to provisions in the proposed legislation that would have imposed tighter rules on parts of the crypto market.

According to data shared by Cointelegraph, Hougan specifically pointed to stablecoins and crypto exchanges as areas that benefited from the bill not advancing.

Stablecoin Rewards Remain Outside the CLARITY Act

One of the central disputes during negotiations over the CLARITY Act involved whether exchanges could provide customers with rewards generated from stablecoin holdings.

Hougan said banks had pushed to prevent exchanges such as Coinbase from passing stablecoin interest to customers. The final version of the legislation would have prohibited platforms from paying stablecoin interest or yield “in any form” and included penalties of up to $5 million per violation, according to his analysis.

With the bill failing to advance, Hougan said the 2025 GENIUS Act remains the governing federal framework for payment stablecoins. That law prohibits stablecoin issuers from paying interest but does not impose the same restriction on exchanges, leaving platforms able to offer rewards on stablecoin balances without a federal limit under the provision he discussed.

Hougan identified Coinbase as a major beneficiary of that distinction because of its use of stablecoin rewards as part of its customer offering.

Exchanges Avoid Additional Structural Restrictions

Hougan also argued that crypto exchanges avoided several changes that would have been introduced under CLARITY.

The legislation would have established a national licensing framework for spot crypto exchanges. Under the existing system described by Hougan, exchanges generally operate through state-by-state licensing arrangements.

The bill would also have addressed the structure of crypto trading platforms that combine exchange and brokerage functions within a single business. Hougan said CLARITY would have placed limits on that model, potentially increasing costs for exchanges. With the legislation no longer advancing, those restrictions are not being implemented through the bill.

SEC Actions Add to the Regulatory Shift

Hougan's argument extends beyond exchanges and stablecoins. He also pointed to actions taken by regulators after the CLARITY Act failed to advance.

Two days after the Senate vote, the SEC issued an order allowing certain venues to facilitate trading in tokenized U.S. stocks through permissioned automated market makers and liquidity pools. The order exempts qualifying venues from registering as exchanges and liquidity providers from registering as dealers, subject to conditions.

The SEC has also issued guidance addressing revenue-generating tokens. Hougan highlighted an agency FAQ stating that, once a network is functional, announcing a buyback program does not by itself cause its token to become a security.

Hougan acknowledged that the absence of legislation leaves a longer-term regulatory risk because future administrations could change the approach taken by federal agencies. For now, his assessment is that the market has traded the certainty of congressional legislation for regulatory actions that he views as arriving more quickly.

Writer: Ethan Collins
Crypto Journalist
Ethan Collins reports on developments across the cryptocurrency and blockchain sector. His work covers market movements, protocol updates, regulatory changes, and emerging trends in digital assets.
He focuses on presenting complex topics in a clear and accessible manner for a broad readership.