Failed Senate Cloture Vote On Clarity Act Offers Some Clarity

“Therefore be imitators of God as dear children.” Ephesians 5:1.

God’s number one quality is love. Therefore, imitating Him is to love others as I love myself, which is much easier said than done, especially for those who oppose me or may not even like me. Nonetheless, grace is paramount as without grace, no one is worthy of the salvation of Jesus. Crypto and digital assets may be somewhat bipartisan, but this topic instills very opposing opinions and positions on utility and efficiency versus complete utter uselessness. For investing it isn’t about who’s right or wrong, but it is about future potential, and the correct way to understand what makes sense regardless on what side of the fence one sits on.

Full disclosure upfront, my portfolio includes Bitmine Immersion Technologies, Inc. (BMNR), Circle Internet Group (CRCL), and Coinbase Global, Inc. (COIN) and these are long-term holdings looking to maximize digital asset growth. The Clarity Act’s inability to proceed even through a cloture vote by the U.S. Senate was perceived as highly negative both through media and through selling pressure on Cryptocurrencies, and the companies in my portfolio, among others.

But I think that reading between the lines is very important before simply claiming that this result is a devastating blow to the industry. There are a few items to clear up to this point:

• Bipartisan: Clearly from the House passage, bipartisanship was not a major hurdle. However, during the Senate cloture vote, Democrats held the line and a handful of Republicans even crossed over. Seemingly, this is contrary to the House vote and could imbue a divide. But as many suspected based on the upcoming mid-term elections and banking and state attorney general complaining, today’s voting was primarily posturing.

  
  

• Ethics: The debate on the ethical benefits of federal elected officials owning Crypto and digital assets with respect to themselves and their families has also seemingly been a hot topic. However, at the end of the day, the White House has given a lot of control to states and met most of the desired issue areas (evidenced by a doubling of the bill’s page count to over 600).

  
  

• Stablecoin Yields: Banks have cried foul very loudly regarding the potential loss of deposit accounts to stablecoin yielding entities like COIN. However, during the past five years, bank deposits across regional banks and credit unions and larger banks have continued to grow, indicating no clear danger (like the concerns from the 1980s regarding money market accounts).

  
  

• Readiness: What’s the real driver for the delay? In my opinion, readiness of banks to launch their approach to instituting a stablecoin that can be integrated globally, notably across the U.S. and Europe initially. Today’s vote was less about all the noise conjured up and more about posturing for votes with the mid-terms approaching based on perceived issues related to ethics and stablecoins.

What should investors make of the recent volatility. Today’s selling pressure was mostly associated with the inability to pass the Senate’s cloture vote. One could argue that the cloture vote not passing was the worst scenario outcome. But with tomorrow’s likely Federal Reserve rate increase, concerns for risk-on assets also played a role in adding to the volatility. Cathy Wood among others took profits off the table prior to today’s vote, and most in the know were very pessimistic about any passage of the Clarity Act, so today’s outcome was not highly surprising.

Tomorrow also offers an interesting twist as CRCL’s Arc Mainnet is launching with some big institutional players signed up to initiate on the platform. Morpho and other DeFi platforms have witnessed increasing and peak loan growth. The Securities and Exchange Commission, or SEC, and Commodity Futures Trading Commission, or CFTC are expected to begin the rulemaking processes, notably for tokenization despite no new legislation. Depending on the degree of hawkishness from the Fed’s action and statements, and sophistication of understanding that Crypto and digital assets are poised for the same trajectory of growth regardless of today’s events, and either tomorrow or later this week, we could see a reversal for stocks and digital assets with more buyers coming in now that the Clarity Act is out of the way.

Investors should continue to expect volatility regardless of tomorrow’s outcome. Geopolitics, war, energy price impacts and inflationary concerns will continue to be pitted against employment, consumer activity, GDP, and corporate earnings performance on a quarterly basis. AI growth will also be a main factor that markets will be wrestling with. In any case, the long-term potential for Crypto and digital assets remains robust and the clarity that has been provided from a lack of Clarity Act is that less legislation is less impactful to the vertically integrated innovators in this sector. This is based on the fact that nothing changes from their business model standpoint, while legacy financial companies like banks are not afforded any respite on the state yield risk; but as we know, this wasn’t a core sticking point, readiness was.