Clarity Act Odds Jump to 75% After Surprise Senate Vote | Alex Thorn

Summary

Bankless Podcast Summary
Episode: Clarity Act Odds Jump to 75% After Surprise Senate Vote | Alex Thorn
Date: May 18, 2026
Guest: Alex Thorn, Head of Research at Galaxy Digital

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Episode Overview

This episode dives deep into the recent, pivotal progress of the Clarity Act—the landmark U.S. crypto legislation—with expert guest Alex Thorn, Head of Research at Galaxy Digital. The discussion charts the bill’s surprise bipartisan advancement in the Senate Banking Committee, its significance for the crypto ecosystem, and the key remaining hurdles on its journey to becoming law. The episode provides essential insight into the legislative, regulatory, and market implications of the Clarity Act, as well as broader reflections about U.S. financial leadership and crypto’s future.

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Key Discussion Points & Insights

1. Historic Vote & Bipartisan Momentum

[00:40–02:44, 07:29–08:12, 42:14–46:21]

• The Senate Banking Committee unexpectedly passed the Clarity Act with a bipartisan vote, leading to a significant jump in optimism for its passage—from a 50/50 "coin flip" to a "65-75% chance" of becoming law this year.
• Two Democrats (Reuben Gallego, Angela Alsobrooks) breaking party lines was a positive shock—raising hopes for broader bipartisan support.
• Alex emphasizes how consequential the bill is:

  “If we get these both through, you’re looking at decades of innovation and integration using blockchains in US capital markets. And that’s why you want it.” (Alex, 00:00; repeated at 23:35)

• The outcome resets expectations industry-wide and reflects substantial cross-aisle collaboration and compromise, particularly from senators like Cynthia Lummis and Kirsten Gillibrand.

2. The Path Forward: Legislative Steps & Timeline

[05:50–07:29, 09:32–12:12, 49:01–49:33]

• Next, the Clarity Act needs to be reconciled with the Senate Agriculture Committee’s bill before moving to the Senate floor, then to a joint process with the House for final passage.
• With only nine weeks left until Congress's recess (and historical legislative inaction after midterm election recesses), timing is very tight – but possible.

• “It could take seven weeks of work if everything goes right... The room, the wiggle room that we have is just not a lot.” (Alex, 05:50; Host, 07:29)

3. Critical Hurdle: The Ethics Clause

[08:12–15:03]

• The main unresolved issue is ethics—Democrats want restrictions on government officials (and their families) profiting from, owning, or trading crypto.
• The White House signals it will only accept a provision that doesn’t single out the President and Vice President.
• Alex projects that if a compromise is found here, most remaining issues should fall away:

  “If a deal here is struck, probably most of the other issues that are...outstanding fall away completely.” (Alex, 14:39)

• The ethics issue could still “statistically likely” kill the bill if not resolved (Host, 09:32).

4. Stablecoin Yield Compromise—“Kicking the Can”

[15:03–22:29]

• After months of negotiation, banks and crypto industry compromised on stablecoin yield: third parties (like exchanges) can offer rewards only if tied to user activity, not for passive holding—in order to avoid direct competition with traditional bank deposits.
• However, precise definitions ("What constitutes activity?") remain to be determined by future rulemaking.
• Alex’s take: It's not a win for either side, and banks’ continued resistance seems more about delaying innovation than genuine concern:

  “No one thinks a compromise is good. That’s why it’s called a compromise...they’re playing a cynical game here.” (Alex, 17:58, 22:08)

• This part of the debate will be revisited during rulemaking after the Clarity Act is enacted.

5. Rulemaking & Administration Impact

[25:01–30:26]

• Rulemaking on controversial issues (like stablecoin yield) will fall to a joint effort between the SEC, CFTC, and Treasury, all led by currently pro-crypto appointees.
• Precedent could shift if administrations change, but the current regulatory environment gives crypto participants a “home field advantage”—at least until 2029.

• “While two and a half years [we’re] for sure good, frankly...we’re not necessarily that likely to get as uniquely bad administration as the Biden administration was on crypto.” (Alex, 29:44)

6. Why Getting a Bill Passed Matters—“Clarity” with a Capital C

[30:26–38:42]

• Agencies can give “lowercase c clarity” (interpretive guidance), but only legislation hardens policy into law and reduces rollback risk.
• Even without the Clarity Act, progress in regulatory clarity and large-scale institutional adoption is already underway—but statutory clarity cements the U.S. as the global crypto financial leader and gives entrepreneurs the confidence to invest long-term.

• “It’s sort of the last leg of maturity of institutional adoption.” (Alex, 35:28)

• The absence of permanent legislative clarity increases the risk of adverse pivots in regulatory attitude.

7. Impact Across Assets & Ecosystem

[40:32–42:11]

• The Clarity Act would benefit the whole crypto sector, but especially “smart contract platforms like Ethereum and Solana” (Alex, 40:32).
• While Bitcoin is already broadly accepted by market regulators, tokenized securities, DeFi, stablecoin providers, and platforms stand to gain most if the Act passes—particularly via more legal certainty for innovative business models.

8. Where Do Odds Stand Now?

[42:11–46:21]

• After the Senate Banking vote, Alex upgrades his outlook to a 65-75% probability of passage in 2026.
• The shift owes to bipartisan votes, courageous senators crossing party lines, and years of groundwork by key legislators.

• “I would say it’s 65 to 75% now likely that the bill will ultimately be signed into law this year.” (Alex, 42:14)

• A successful passage is viewed as a clear upside catalyst for crypto markets; failure, while disappointing, probably won’t be catastrophic given continued regulatory progress elsewhere.

9. Market Implications & Closing Thoughts

[47:21–48:41]

• Host closes by reflecting on the historic nature of these developments—it’s a rare moment where the U.S. is on the verge of setting the world’s crypto standards legislatively.
• Alex, asked for a bitcoin price prediction if Clarity passes, stays measured:

  “New all time highs, they’re in sight...the odds go up if Clarity is signed into law. They do. It’s a big upside catalyst.” (Alex, 47:30)

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Notable Quotes

• On the Clarity and Genius Acts:
  “It’s almost like the Securities Act of 1933 and the Exchange Act of 1934... If we get these both through, you’re looking at decades of innovation and integration using blockchains in US capital markets.”
  – Alex Thorn, [00:00], [23:35]

• On the surprise bipartisan vote:
  “So when it wasn’t and Reuben Gallego and Angela Alsobrooks voted yes, that was a very exciting surprise.”
  – Alex Thorn, [01:06]

• On the main risk to the bill:
  “There are a lot of possible pitfalls and potholes that can really muck us up... both Angela Alsobrooks and Ruben Gallego stressed repeatedly that their vote for yes out of the committee does not guarantee their vote on the floor.”
  – Alex Thorn, [08:12]

• On the stablecoin yield compromise:
  “No one thinks a compromise is good. That’s why it’s called a compromise...they’re playing a cynical game here.”
  – Alex Thorn, [17:58], [22:08]

• On why passing the Clarity Act matters:
  “It’s sort of the last leg of maturity of institutional adoption...it prevents that rollback risk that could happen in the case of a second hostile administration in the future.”
  – Alex Thorn, [35:28]

• On odds for passage:
  “I would say it’s 65 to 75% now likely that the bill will ultimately be signed into law this year.”
  – Alex Thorn, [42:14]

• On the U.S. setting the international standard:
  “We want it to be our standard...our rule of law and our courts... rather the world converge on our view of the market than somebody else’s.”
  – Alex Thorn, [37:07]

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Key Timestamps

• [00:00] Intro—Bill’s significance for U.S. markets
• [01:06] Bipartisan committee surprise vote
• [05:50] Next steps & timeline for passage
• [08:12] The critical ethics provision hurdle
• [15:21] Stablecoin rewards compromise explained
• [23:35] Bill’s historic significance restated
• [25:23] Rulemaking agencies and administration influence
• [30:26] Why passing a bill matters more than agency policy
• [35:28] Institutional adoption and legitimacy
• [40:32] Who benefits: Bitcoin vs. smart contract platforms
• [42:14] Updated odds and key players
• [47:00] Historical significance
• [47:30] Bitcoin price implications if passed

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Final Thoughts

This episode offers a comprehensive, insider’s look at the complex balance of legislative, political, and industry forces shaping the future of U.S. crypto regulation. Alex Thorn’s grounded optimism captures the prevailing sense: while nothing in Washington is guaranteed, the surprising bipartisan momentum behind the Clarity Act could catalyze a new era for crypto markets—not just in the U.S., but worldwide.

Transcript

[A]

This bill is, and I've written about it as so foundational when you pair Genius and Clarity together, that it's almost like the securities act of 1933 and the Exchange act of 1934, the pair of which, and of course there were others that also mattered. But those two laws basically created the conditions for the last 100 years of US capital markets dominance. And I sort of view the pair of Genius and Clarity. If we get these both through, you're looking at decades of innovation and integration using blockchains in US Capital markets. And that's why you want it.

[B]

I'm here with Alex Thorne. He is head of research at Galaxy Digital. I think being head of research at Galaxy Digital means that you are researching Clarity act for the past two, three, four months, maybe even longer. We just got a huge vote. The Senate Banking Committee voted to pass the Clarity Act. Passed the committee. Now it has to go to the Senate floor. So we're definitely not done yet, but a pretty substantial vote. Alex, how excited, how thrilled are you right now? How are you feeling?

[A]

I'm very excited. I have been a little bit on the pessimistic side in this bill over the months. You know, just the amount of complexity that is required, the competing equities, you know, banks and the Dems and the Republicans and the White House and, and the law enforcement and the developers and there's just so many and so many issues. It's such a big bill that I'd been generally, I would say on the more pessimistic side. You know, in, in the sort of crypto policy world, I'm not pessimistic now. I think we're saying 75% chance likely that it gets signed into law this year, which is what mean, I think two weeks ago I called it a 50, 50 coin flip. That's because we were surprised. In the end we got two Democrats to vote with the Republicans on the Senate Banking Committee to advance the bill to the floo. So the bill is bipartisan and we've all wanted that and worked very hard for that to be the case. And there's, you know, considered to be about five gettable Democrats on that committee who like crypto and could vote yes. Many of them voted. You know, they, I think all voted for the Genius act, for example. But late, late Wednesday, it just, it didn't seem like they had gotten to a place where they could vote yes. So we, most of the people woke up that have been really close to this on Thursday expecting it to be a party line vote. So when it wasn't and Reuben Gallego and Angela also Brooks voted yes. That was a very exciting surprise. So now we're feeling very good. So partly expectation game. Technically we'd like to have had three or five, but for, you know, a bit while watching it, we thought we were going to get zero. So you know it was an upside surprise.

[B]

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[A]

Yeah, there's a few steps. I'll walk you through it. First, the Clarity act from the Senate Banking Committee has to be reconciled with the Digital Commodity Some Intermediaries act which is the Senate Agriculture Committees 1. Right. Because Senate Banking does SEC and bank stuff, but Agriculture does CFTC and commodity stuff. And of course a lot of cryptos are commodities. And so those have to be reconciled. That could take maybe a week. You know that's like getting the heads together and smashing them together into one bill. Then you need floor consideration. Right. So that is the Senate floor debate and that will take a week. And let's assume the Senate then passes it. Then there's a process between the Senate and the House to reconcile the digital the Digital Asset clarity Act of 2025 that the House passed last July with the now Senate package that will have passed that could take A week. And then, and then the House will have to vote on the reconciled package as well. So who knows? That's not probably a quite a week. The House is much faster than Senate. All of this adds up to. It could take seven weeks of work to actually, if everything goes right, if, if all the votes pass and stuff and there's no weird hiccups to get this thing to the President's desk and have him sign it. The. There's only nine weeks of actual Congress time between now and the August recess. And after the August recess, in a midterm election year, historically, pretty much nothing happens. So we've got about nine weeks and we think it'll take about seven. So theoretically we've got two weeks of buffer. I'm hoping that like they start working on it Monday morning.

[B]

Yeah. So let me kind of articulate what I think is going on and you can kind of correct me. Things are like looking good. We have a high, like our expectations are rerated to the upside about how unanimous bipartisan this bill is. That's great. It's out of the Senate banking. That's great. There is a bunch of steps that this thing needs to go through, but we don't perceive that there's going to be any big blockers. We think the Senate's going to vote yes, we think the House is going to vote yes. But really the margin for error, the room, the wiggle room that we have is just not a lot. So if something happens, it can go from being likely to pass to we just ran out of time and by the time we get to the midterms, it's a whole new, it's a whole new Congress. Right.

[A]

There are a lot of possible pitfalls and potholes that can really muck us up. So I, I want to say, and I should say both Angela, also Brook and Ruben Gallego stressed repeatedly that their vote for yes out of the committee does not guarantee their vote on the floor. All sides are saying there's a lot of stuff to be worked out still, we should talk about that. So I, I think, you know, given that we were able to get this negotiated compromise in such a fireworky, last minute way, I think that's giving us optimism that although there are potholes, like, we could probably work those out too, but it's definitely not a given. I think in the Senate is still the big, I mean, one of the big ones to talk about is ethics. Right. The Democrats want some form of prohibition on govern government officials, elected officials, maybe their families, either launching, owning Profiting from trading, endorsing, etc. Cryptocurrencies. Right. And that is, that issue is not germane to the Senate Banking Committee. If it were to be considered in a committee, it would probably be in the Ethics Committee. And so technically, it wasn't even appropriate to consider an amendment about that in Senate Banking, and they did not. So that, but that will be a big part of advancing this on the floor.

[B]

Would you say that the ethics issue is if, if the bill fails for whatever reason, it's like, statistically likely to be the ethics reason?

[A]

Absolutely. Yeah, absolutely.

[B]

Why can't the Republicans just give the Democrats what they want on this?

[A]

Well, I mean, if you think about it, there's one person that has the most legal authority to kill this bill than anyone else, and it is the President of the United States.

[B]

Yes.

[A]

He can veto the bill. Right.

[B]

The antagonist of the ethics issue. Like, he's the subject of the ethics issue. But also, like I was thinking about this this morning, say Clarity act, it passes the Senate passes, the House gets reconciled, we get all the obstacles, it gets to the President's desk and it's the Clarity Act. It's. He wants to make crypto, the United States, the crypto, the capital of the world. But the ethics clause is in there preventing presidents, him and anyone else from profiting from crypto, and he vetoes the bill when it's on his desk. I just can't see him doing that.

[A]

Yeah, I don't know. It is funny to think about. I think they're not going to send him a bill that has an ethics provision that he hates. So I think the game instead is for, for both sides. I mean, and again, Democrats, many of them want this bill passed as well. Right. I mean, there's a.78 Democrats voted for clarity in the House last year. That was almost half the caucus. So it's the, the sort of the needle to thread here is something that gets the Democrats and others who want ethics provisions here, get them something they can that is, you know, strict enough that it accomplishes their goal while not being unpalatable to, you know, Republicans in the White House. And, and I do think there is a path there. The White House has pretty much signaled that as long as the ethics provision does not solely single out the president or vice president, the constitutional officers that they represent, they, they, they could before they could be okay with it. So I, It's a matter of finding that language. Like we knowing, you know, we've. Plenty of people have guessed at what the language could be. And knowing, you know, even smart people, we know what the parameters might be and what are. I'm not aware that anyone has actually shared any text on this. I think it's mostly Kirsten Gillibrand, Senator Lummis, maybe Bernie Moreno Gallego, also Brooks that are sort of like negotiating this. I know Kirsten Gillibrand, who's a very big supporter of digital assets in the crypto industry, but also feels very strongly and has said publicly that she wants an ethics provision. So I think this is going to be like a rerun of Lummis Chilla brand, and it's just a matter of if they can get something that is good enough and. But that the president will sign.

[B]

Do you think that it's a matter of just how the wording of the ethics clause targets or does not target Donald Trump specifically? So if, if the clause is like, Donald Trump specifically cannot do this, then Donald Trump is vetoing it. But if it just adds him to a large group of people and gives him the ability to kind of save face because he doesn't want to sign a bill that's like an anti Donald Trump bill, but he'll sign a bill that like, allows him to, like, retain his pride, retain his ego, like, say that he won, get like, you know, be able to say that, you know, I got everything I wanted here. And so if it gives him like this deniability or this way to preserve his ego, then he'll sign it, I think so.

[A]

I think it's basically something like that. I think. I mean, I mean, I think if it's. If they want to, you know, modify the ethics provisions that already exist to just add the word crypto. Right. Like, I think that's pretty reasonable. And I, Yeah, they don't want anything targeting the. And it's not just because of what President Trump, like, or his family are or aren't doing in crypto. It's because they don't want from sort of a constitutional standpoint. Like, it's a much higher bar if the Congress is going to start dictating what the, the President, the Article 2 officers can and can't do. Like, you know what I mean? Like, it's. This is the president and the vice president. They're constitutionally elected officers that are in the Constitution, as are in. In the executive branch. They are the executive branch. And so I think if it's. It's perceived to be the legislative branch attacking the constitutional officers of the executive branch, people have some constitutional questions about that and becomes much trickier if it says government elected officials, like, who already have their own restrictions will now just. Will add this to a list of things. I don't think it's as controversial. We don't really know though, honestly. We, I mean, we haven't seen language and this has sort of been on the back burner while the finance and treasury related issues are sorted out in the committee. So like, this is sort of a fight still yet to be had and it could, it could spin a lot of different ways. I, I'm somewhat optimistic though, like based on some of the needle threading we just discussed that something could get done. And I also think that if a deal here is struck, probably most of the other issues that are still sort of outstanding fall away completely. I, I don't, I think like, for example, stablecoin yield, if that's. If the banks are still agitating and stuff, or brca. Right. Law enforcement still wants, you know, changes or whatever. Like, I think it's plausible in that spot that if ethics is solved, like, people are just gonna say, all right, good, we're done. That was the hardest one, I think. So that's kind of why we're optimistic because like, you and I just now were able to envision a pathway for ethics, and that's the biggest blocker at this point. So if that's, if that clears, I think you're, you're in pretty good shape.

[B]

Let's talk about the big hurdle that we just got over, which is maybe not completely got over, but stablecoin rewards the compromise between the banks and crypto. There was a compromise here. Who do you have an opinion on who kind of got the better deal, do you think? It was kind of split down the middle pretty fairly, what happened here?

[A]

I think it was, it's pretty fair. I mean, I mean the high level contours, which I know you guys have talked about on your shows plenty, so I mean, your audience is probably well aware, but just really quickly restated is that the Genius act already banned permitted payment stablecoin issuers from passing yield to token holders. However, it didn't take us a position, the Genius act doesn't, on whether or not some third party can pay yield. Right. And of course, this is particularly relevant because Coinbase and Circle have a specific arrangement where I think it gets 50% of the revenue and 100% of the revenue for stablecoins held on their platform. So they're, they're kind of close to the issue or they're actually getting the underlying collateral yield already. Right. So it'd Be a little different if like a random crypto exchange wanted to pay. It's like, I mean, sure, you can pay your users to put stablecoins there, but if, if the, if you're not getting paid for it yourself, why would you do that? The, the compromise has been that a third, an exchange or a third party intermediary can pay rewards if they're tied to user activity and not to simply solely in connection with holding the stablecoin. And that's because the banks think that that looks like a bank account and that it will cause, they argue that it will cause deposit flight out of the banking system. And in a classic sort of collegiate debate like spiral escalation, the flight from the banking system will cause the economy, will drive lending in the economy, and that will cause the economy to collapse and then, you know, a nuclear bomb will go off or whatever.

[B]

Yeah, I think there's plenty of research. I think you guys put out some research that kind of just showed that this was just not going to be the case. But I'm not sure the facts of the matter really mattered. Like it was an argument that they needed to justify their actions, which is to preserve their profits. But whatever. I think really the question is how much flexibility is in the wording. Uh, you, you tweeted out the wording. I don't know if that's still accurate. Cannot pay stablecoin yield solely in connection with holding idle balances or in a manner economically or functionally equivalent to bank deposits. So I think the question is like, how, how easy is it for Coinbase or anyone interested in providing yield rewards to their customers? How many hoops do they have to jump through to be able to get over the hurdle of. Yeah, with activity?

[A]

You know, it's such a good question, David, but I don't think anyone really knows the answer to it because this will also go through rulemaking after. So like, I think the specifics of that stuff will be hammered out probably in subsequent rulemaking downstream from the legislation.

[B]

So it sounds like this fight is not over.

[A]

Yeah, well, and that's. It's not. And if you go and look at the, the Genius act rulemaking is happening now at the occ and, and the banks are fighting there about it as well. So, like, these fights will go on. I think, you know, personally, the research we put out showed that for every dollar of interbank domestic deposit migration, you're going to get $2 of foreign inflows into US banks. So, sure. Can there be winners and losers? Like when a new technology or New product comes out. Of course, there always can be. And you know, small or mid sized banks that you know, don't have aren't tech forward or take a, you know, head in the sand approach to a new banking technology or a new money technology. What stable coins are. Yeah, they, they might not do that. Well, I think that's right. But the, the irony here is that one, I think the biggest threat to small and mid sized banks is big banks who have been opening tens of thousands of branches across, you know, middle and rural America. And also they're all building it too. The big banks, they're not that concerned really about their deposits flighting. Right. They're building stablecoins, they're building wallets and crypto infrastructure, they're doing all of that. So I actually think this whole thing and you know, you saw this, that compromise that Thom Tillis and Angela also Brooks hammered out that they worked for four months on and they had meetings at the White House with the bank lobby and crypto and the senators. Then as soon as they released this compromise, the banks disavowed it and said it's not good. And I'm sorry but like first of all, that's incredibly ridiculous and rude. Okay, no one thinks a compromise is good. That's why it's called a compromise. Right. Second though, like, I really think that this is part of a strategy to deny, delay, obstruct while they hopefully entrench and build their moat with our technologies. Right. Like, I really think that's what's happening here. I think once they came out and opposed the compromise that they had been involved in constructing, I think it became clear that they don't want to deal and maybe they never did. And so like I just don't. To your point, like the, my, our research on deposit migration or capital inflows, I mean I think we found that for every dollar of a stablecoin you're going to get 31 cents of a net new credit creation. So not only will it not close down credit creation, it will increase it, but that none of that matters. I think this is a pure like moat protection game. It looks like they're playing the innovator's dilemma and trying to delay and give themselves time to build is what it looks like to me.

[B]

Yeah, and it also sounds like okay, we got the stablecoin rewards compromise for now, but the way that we got it was we just punted it till rulem and say hey, we're not going to nuke the bill over this, but we are Just going to fight. We're going to fight this same fight later. We've come to terms that we can agree with. There's like, we have the wording. We cannot have stablecoin year yield in a manner economically or functionally equivalent to banks. That's the line that's drawn. But where that line is specifically positioned is going to be found out down the line with the rulemaking, which happens after the bill. So at least we get the bill. But the actual issue of can we have, like, bankless bank accounts and how easy is that loophole of getting there is still up for debate. But hey, at least we get the Clarity bill passed along the way.

[A]

Yeah, I think that's basically right. I mean, because the question is, I think you're not going to be able to take $10,000 of stablecoin and park it at Coinbase and then never touch it and watch it earn interest. Okay. I doubt, actually. Well, maybe if you open the account for the first time, though, maybe that counts as an activity they could give you some reward for. Yeah, what, what constitutes activity that allows them to pay you the rewards or the yield? It's, it's.

[B]

Can, like, can circle. Turn USDC into a governance token and have it govern something completely that way? Yeah. And then you stake it into the governance contract and like press a button to. To if, If Jeremy Allaire should get a haircut this month. I don't know.

[A]

Honestly, maybe, I mean, maybe, I don't know, maybe they just can't be solely in connection with holding.

[B]

Right, right. So so long as you're pressing buttons, I think you get yield.

[A]

That's what it sounds like, but it's not. Again, we. And you're totally right, like, that's going to be determined. Tbd. But I mean, look, the banks did get a prohibition on purely passive yield. They got that. So, like, I think they, they got their thing and yet they're still mad. That's what I'm saying. That's what's so frustrating. I think they're playing a cynical game here.

[B]

Yeah. So. Well, it sounds like they're just not trying to give up an inch. They're, they're, they're drawing the lines, but then they're trying to push it and then they're trying to push whatever they can. It sounds like what their strategy is.

[A]

It's really interesting because, you know, we work with a lot of big banks and their crypto and trading and asset management team. I mean, there's a bunch of great bitcoiners and Ethereums there, they love. And they're all building. They. They want to do all this stuff. There's. There's a little bit of a disconnect, I think, between the actual. In a way, between New York and D.C. inside the banking industry. Like, there. I wrote a piece about this, like, two months ago saying the banks are building literally everything you can imagine in crypto, but their lobbyists are obstructing in Washington. Right. Is it a case. Is it simply a case of the left hand not talking to the right? Or is it a complex strategy that they've decided, which is sort of.

[B]

It's like an attempted 3D chess of.

[A]

Yeah, I mean, maybe it is.

[B]

There's. They're slow to innovate and they just need as much time as possible. This is always kind of what I thought Gary Gensler was. He's just a smokescreen, just, like delay the industry as much as he can. So while the banks can catch up to whatever they need to be doing, he did that role perfectly. Yeah.

[A]

I'm surprised by the way that we haven't. I was wondering if we were going to see like an op ed from Gary Gensler or something this week leading into this hearing. Or we may still, like, he's been keeping his head down, which I think, you know. Well, I don't know about his strategy probably makes sense. But, you know, I think this bill is, and I've written about it as so foundational when you pair genius and clarity together, that it's almost like the securities act of 1933 and the Exchange act of 1934, the pair of which. And of course, there were others that also mattered. But those two laws basically created the conditions for the last 100 years of US capital markets dominance. And I sort of view the pair of genius and clarity, if we get these both through, you're looking at decades of innovation and integration using blockchains and US Capital markets. And that's why you want it. You know, like, we're going to be fine if we don't get clarity. You know, like, industry is doing pretty good. The market regulators are working and, you know, they're supportive of innovation rather than combative. You're going to get a lot of what clarity has, at least through like interpretive guidance or exemptive relief, probably from the. The two commissions. But, you know, you see how fast Atkins was able to pivot away from the Gensler area. Like they could pivot right back, you know, if it's not caught. So that's two and a half years but you know, these two bills, you know, Clarity could help solidify it for two and a half decades. And that's the reason you want it.

[B]

I see. I do want to go right into this topic, but I have one more question about the stablecoin yield before we, before we depart with a. Get formally interpreted. After, after the Clarity act assuming passes, then there's some formal rulemaking about the interpretation of the stablecoin yields, as we just discussed. Who does that rulemaking? How does that rulemaking happen? What does that process look like?

[A]

That's a really good question. I'm not entirely certain. I think if you are a crypto exchange, then you are likely to be like a digital commodity broker under the DCIA, the AG1, and maybe those rule makings will happen. You know, generally I think the OCC is going to be the primary prudential and supervisory regulator for Genius act stablecoin issuers, ppsi permitted payment stablecoin issuers. But it's the, the, the rule would more apply to the third party intermediary. So I think it's possible that's going to be like the CFTC and the SEC in some combo as they oversee the actual platforms that, you know that whether it's a crypto exchange or a sort of an OTC desk like a Galaxy or you know, a trading firm, whatever. So I think it's going to be part of the, the regulation of the intermediaries where that lands. But it's, it's, honestly, it's not that clear, wasn't even necessarily clear that the OCC would be the lead regulator of stablecoin issuers. I think they just, they went first, they're sort of staking their jurisdictional claim as the main one.

[B]

So this is what my understanding was, is, is that it's going to be a joint rulemaking effort from the sec, the CFTC and the treasury in this, in this current administration. Those are our guys. Like those are our people. That's Mike Selig, that's, that's Paul Atkins, those are the people put into positions, those respective positions by Donald Trump to make the United States the crypto capital of the United of. Of the world. And so if I'm Brian Armstrong, if I'm on the crypto side of this, I'm pretty happy to punt on the stablecoin yield debate because, okay, like we're not going, we're not getting it won in the bill, but we'll get the rulemaking from people who are absolutely pro crypto. So it seems like a pretty Favorable like home field advantage for the crypto industry when it comes to the interpretive rulemaking.

[A]

Yes, it definitely does, but only for, only guaranteed until, you know, January 19, 2029. Right.

[B]

So there is some precedent that is set when these agencies do rulemake.

[A]

I know but think about, like think about Brian Brooks. He, you know, gave Anchorage a OCC charter and passed. I forget the numbers now, but had these great interpretive letters from the occ Mike sue, the acting one under Biden instantly came and rescinded them. Right. Like yeah, but Biden was the.

[B]

Okay, I know, I know I'm very, very pro crypto here. But the Biden administration was the idiosyncratic SEC administration versus the one that came before it. So the, the when we interviewed the guy who worked under Gary Gensler, like Gary Ganzler, one of Gary Gensler's lawyers, he talked about how it's so unprecedented that Donald Trump's administration is coming in and not having a logical continuation of the policy of the previous SEC or the cftc. Like apparently the way that it works is that like the, these three letter, four letter agencies need to have some sort of policy continuation from the organization that came before it because there were court cases, there were some precedent being set. They can't just 180 and you know, rug pull the industry. And that has been the precedent. And he was making that point about the Donald Trump administration and the SEC and the cftc. But if you look at, if that's, if you take that point, they are, they are the idiosyncratic ones doing the weird thing because their, their precedent was established uniquely and indifferent and was different to the SEC and the CFTC that came before them. And so we have this only, only the Biden administration with Gary Gensler is it is the precedent of the anti crypto SEC policy really established and actually with the Donald Trump administration is kind of closer to business as usual. This is my rosy colored glasses. Obviously I'm pro crypto, but like that's my take on it.

[A]

I like this take a lot. David. I think you're right. I think that even if you compare to Jay Clayton's time at the SEC under Trump, the 45. Right. Trump won. They weren't that friendly, but they weren't that hostile either. Right. It was kind of normal. I, I would say I think we have a uniquely pro innovation commission. But again Paul Atkins was on the commission before. It's not like these people are, we didn't pull people out of left field to do this stuff. These are Long time SEC people.

[B]

Right.

[A]

All of them. Right. So I, I, I think you're totally right. I think, and I guess the downstream point you're making here is that while two and a half years were for sure good, frankly, like the I, we're not necessarily that likely to get as uniquely bad administration as the Biden administration was on crypto. Even if it is Democrats, it's not. And I think that's a fair point. I haven't really thought about it that way, but because I'm so, like, in the trenches of this, you know, you know, I'm, I'm out here like Winston Churchill, like, we will fight them in the committee. We will fight them on the floor. We will fight them, you know, I'll drink this vodka and then we'll fight them as well, like, or whatever. But you're right, I think if you step back like that, that was a pretty unique attack on a particular industry across multiple vectors.

[B]

Yeah. It's unfair. It's incorrect for them to claim that they have precedence because they, they were the unique ones. Okay, let's get into the, the importance of clarity. As you stated, Alex, the reason why clarity is so important is because we lock in this policy through Congress. It's basically, it's basically written in stone. If we get a bill through Congress, it's so hard, you have to do another bill to undo everything. And that's why we like clarity. It makes it just so permanent. There's, there's benefits of agency precedent, as we just said, but really what you want is the gold standard is to get a bill passed. Now, granted, we're kind of getting clarity elsewhere. We have the sec, we have the cftc, they are doing pro crypto things. They are giving us clarity and the semantic use of the word, the lowercase C clarity. And so while absolutely we want clarity to lock it in, it kind of seems like, and this is what I want you to check me on that. That's actually what the Clarity act is doing. It's not actually giving us clarity because we got a lot of the benefits of clarity through these other agencies. The main benefit of clarity is to lock it in. And so my question is, like, aren't we kind of good? Like we're at risk, but we're kind of good because we've gotten, you know, lowercase C clarity. It's the same thing that the Clarity act will actually give us elsewhere. And so straight, like, totally acquiescing to the idea that, like, obviously we want to lock this in for forever is the Clarity act that important anymore?

[A]

Yeah, I. I'm with you on this, David. I, I think in some ways the industry has. Well, because they really want it. We all really want it. So we've said it's such a big deal and it is a big deal, as, you know, putting again, that caveat out there. Of course we want it. We are. We have gotten a lot of what we already want and we're probably going to get a lot more. You know, you're going to get some cool stuff out of the sec. They've been very public about a reg crypto, which it's like a legal ICO 2.0, maybe like Hester Purse's safe harbor proposals, something that, that'll be interesting. You're going to get the innovation exemption at some point, which will cover secondary trading, I think, of securities in defi, which we all want and I've worked a lot on because we have our tokenized GLXY in Solana that we would like to be able to do stuff with more. You're going to get a lot of that stuff. I think there are some areas, though, where it really does matter. I think BRCA is probably the main one. Right. You got the blanche memo from DOJ that said, you know, if you're like, genuinely not trying to help criminals, then we probably won't come after you. And you had a gal, a guy who's not at DOJ anymore, but in, I think at the Wyoming summits in August, you know, around the Fed meeting and all that. Galeotti, who gave a speech and also said something similar. But you still have sdny, you know, retrying, trying to retry Roman on things that they didn't get him on the first time. So, like, that's one where like, yeah, you kind of got a little bit of interpretive guidance, as it were, from doj, but, you know, they're still using the law the, the way it was previously written. So I think something like that really is a net change that we really can't quite get just from regulators and agencies. Right. But otherwise, I mean, I agree. I think I've tried to characterize the passage of the Clarity act as a potential serious upside catalyst, but, like, not that bad of a downside catalyst if it doesn't happen. Because I think, you know, there's a. There's going to be a tendency if, if somehow it comes out with a full headline. Clarity act fails will not be done again in 26. And there's a caveat to that point, too. But if that happens, People are going to want to sell a bunch of coins and crypto equities and, and I don't think they need to like so it's, I've been trying to caution on that. I would say that you know, passage is going to be a big flashing headline if that happens. Signed into law. Big, big upside. Easy to see it as an upside catalyst failure probably looks more like a whimper. You know it, they don't have the votes. It fails to the. It's very unlikely. Genius did have a failed vote actually at one point. But it, I, I would say it's relatively unlikely that you actually get full vote that fails. More likely it gets pulled when it's clear the vote won't happen and then it gets shelved and then they say we're going to work on it later. Right. It's not like as obvious. It's not going to be as clean and negative. Obviously you'll have people like me explaining that it indeed was negative. But if that happens. But I, so, so I agree with you. I think it's, it should be viewed as a major potential upside catalyst with like, you know, if we don't get it then you keep chugging along for the next nine quarters or whatever.

[B]

What can we unpack the reason why it's a catalyst. I think the most basic articulation is it's, it's confidence. You also have entrepreneur security. Like you can be an entrepreneur in crypto and you know the next administration is not going to put you in jail because we have the Clarity Act. It's a just a legitimacy angle. So crypto's just more legitimized. Is there more, can we get more specific or is that kind of it?

[A]

Well, you can do longer term investing. Builders can, can do it long term because it prevents that rollback risk that could happen in the case of a second hostile administration in the future. Obviously. And that does matter. I mean markets aren't, they're only getting more frenetic and short term thinking these days with zero day options and you know, fintech apps and stuff. But it does matter that you could make an investment. Say something like with Bitcoin where the thesis is that it's a long term investment. It'd be nice to know that your brokerage or your ETF or your custodian, if you're using these like isn't gonna get sued in 2029. Right. Like that. I think that helps. I would say you are generally right. It is the. I viewed as sort of the last leg of maturity of Institutional adoption. But one thing that's interesting is like take like Morgan Stanley. Like they're already doing pretty much all the. Schwab just launched crypto trading like yesterday or something the day before. Right.

[B]

Yeah. It doesn't seem like anyone's waiting for clarity.

[A]

And I can tell you in like things with these banks and brokerages, they're not saying, well, let's table this conversation until we find out if clarity's passing. They're not saying that. So I think there is a world where if clarity doesn't pass, the big banks and brokerages still have chugged forward and done built all these products and offered them to their clients. And then even in the case of a hostile administration, it's still just so entrenched in the capital markets, it just becomes hard to pull out.

[B]

Yeah. In the case of a hostile administration, as you've said, all the big banks are building all the products. They're building the stable coins, they're building the wallets. Like what? Like it'd be pretty hard to warn the big banks. Yeah.

[A]

I mean if you have 50 million Americans in three years that have exposure to crypto in their, in all their accounts, like it's pretty hard to unwind that even if you want to it again, it could happen. So like that's why you want the Clarity Act. But I, I agree. I think, you know, there, there is just like a U. S. Primacy angle here. Right. Other jurisdict are working on or passing or have passed similar comprehensive frameworks. And if it's viewed that the US's stance on digital assets is too volatile to, you know, invest. If you're a big brokerage, invest 500 million in building out like your stuff here for it. You might build it in Hong Kong or in, you know, probably not, but maybe in Europe where they have Micah or in the UK or in some other juris in Singapore. Right. Like there is the possibility, although, you know, U.S. markets are still the biggest and deepest and best, but so it's not like a guarantee. But I think, you know, if we don't lead on this, that's the other thing. Even if like the big, you know, whomever is the tradfize that want to do crypto, they don't literally pack up shop and move to Singapore. Regulations in this globalized market tend to sort of coalesce on one good standard. And we want it to be our standard. We want it to be our rule of law and our courts and we don't want it, you know, not that like Hong Kong's framework's bad, or that Singapore's would be or whatever, or the FCA in London. Like they might be good, but we'd rather the world converge on our view of the market than somebody else's. I see.

[B]

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[A]

It definitely is. All boats will rise. I think that's fair. I think I've generally viewed that Ethereum and Solana and and more general purpose blockchains ex Bitcoin have more to gain here than Bitcoin generally and from the market regulators, Bitcoin, even Gary Gensler said it was a commodity. It was the only one that he said was a commodity. Right. You know, bitcoin, I think will find itself in a lot more rooms and portfolios after clarity. No doubt it will benefit dramatically. And obviously the BRCA protects all developers, including those who build bitcoin core. Right, like so there's plenty for bitcoin to like here. But I think when you start talking about stuff like tokenized securities or RWAs coming on chain or being allowed to use blockchain technology to XY power the markets in certain ways, I feel like Ethereum and Solana and theoretically any other general purpose blockchain stands to gain significantly. I also think defi, particularly this yield stablecoin rewards compromise because we're all like, oh man, we'd love to earn yield on your stables. Well, you know, you can do that across defi permissionlessly today. Defi has its own different risks and credit risks and smart contract risks. Sure. But it's not like you can't earn yield in crypto. In fact, it's yields pretty much like, you know, I would say outside of bitcoin and like, it's like bitcoin and decentralized trading and yield, those are like the three best product market fits that crypto has built. So like, you know, actually ironically, like I think you could see defi grow Significantly like DeFi TVL if yield is available there but not available, you know, on centralized exchanges.

[B]

Alex, what's your over under on Clarity act passing?

[A]

Well, I two weeks ago I wrote a report, an update final push ahead with like what the outstanding issues were. And I called it a coin flip at 50 50. And that put me at least publicly and on the more bearish side, even at Galaxy right. Novo has, has been publicly much more optimistic than I have been, which is okay. You know, I think we're both right. He's also talking to a lot of folks that I'm not. We're talking to different people and looking at a different way. Following this vote where Ruben Gallego and Angela also Brooks broke ranks with the Democrats to vote yes. I, I would say it's 65 to 75% now likely that the bill will ultimately be signed into law this year.

[B]

Do you think you're also more bearish versus your cohort on debt on.

[A]

I don't know. I think, you know, some people have been consistently bearish. They keep the same number, they've never altered it. And others have been consistently positive and they can, it's more. I, I've, you know, my, our clients that I write for are traders by definition. Right. Like they're, they're investors, but they're not, you know, if you ask me, like, you know, hey, I'm just like a ten year long. Long. Only like that's a lot different. You know, we service a lot of hedge funds and liquid crypto funds and the trade macro, they trade actively. Right. And so that's why I'm oscillating more granularly because they, you know, if you're trading options on, on something like on Bitcoin or ETH or a crypto equity, like the odds at the exact moment matter. It doesn't matter if like XYZ happens. And generally I'm optimistic. Like they, they want to price out a trade right now and they want options. So I, I've definitely been more volatile in my, like, you know, odds making than others. But, and, and look, Novo looks right. He looks righter than I was because he was saying 75 two months ago. Right. Or however many months ago. And now I'm saying it like. And I, you know, I went and I said, look, Mike, you ended up being right, you know, maybe I should listen to you more. So I think it's more that I've moved closer to the. But there are, I mean, I would say the, the reaction across the crypto policy ecosystem after the Thursday's markup hearing, or markup has been to raise the odds of likelihood. Pretty much everybody is, is more optimistic. And I want to say some people in particular deserve a lot of credit. And I'm not going to name all the behind the scenes staffers and stuff, but Cynthia Lummis has been working on this for years. Kirsten Gillibrand as well, although she's not on the Banking Committee. I mean, you remember Lummis Gillibrand. That was in 2022, right? That was their first attempt at this. That was four years ago. And all five of the compromise amendments in Senate banking have Lummis's name on them. Rightly so. Thom Tillis, you know, people were very upset, you know, and I think it turned out that he did a great service to crypto negotiating with the banks. And with Senator also Brooks on the Democratic side and then Reuben Gallego and Angela also Brooks, like breaking ranks and voting yes while your party is voting no takes a lot of guts. And they, and they really deserve a lot of credit for preserving the momentum. Again, it would have gone through on partisan basis. Like we still could have asked all of this out on the floor and maybe gotten the Democrats along there. Maybe. But we live to fight another day with better odds because they chose to cross the aisle and, and they did it in dramatic fashion. Literally. Like people in the room started texting me saying, like, there's something happening, like staffers are like going around. At one point, Thom Tillis went, got up from his seat, went around the, the dais or the dais or whatever and crouched next to Angela, also Brooks, and was talking to her. And then they had some kind of exchange and then he directed his staffer to go do something. And it's like that stuff was happening live on television and it was really quite exciting. And a lot of people deserve a lot of credit for that. But, but I, I would say mostly those senators that I named who had the guts to compromise, to work for years on it and to break ranks. I mean, you're gonna see a, you know, that anti crypto army wing of the Democratic Party open fire on them now. And that's. So we need to be very supportive and thankful for the effort that they made.

[B]

Yeah, it is pretty cool to watch history unfold in real time. I think when we frequently are like, zoomed in on the Clarity act because we're following, you know, step by step by step, we forget to zoom out and actually like, realize how historic and monumental getting this bill over, over the line is. Especially when we talk about, you have people like Chair Atkins at the SEC saying, hey, we're moving our capital markets on chain in the big way. Like, not, not just allowing it to happen, but we're moving what currently exists as Americans capital markets, and we're going to figure out how to put them on chain and it puts into scale how big of a deal Clarity is.

[A]

I was really proud to be an American watching that committee hearing because, you know, the Senate is, at least, it likes to think of itself as the world's premier deliberative body. Obviously, it doesn't always look like that, but this, this was what a democratic republic, how it does business at its best.

[B]

One last question for you, Alex. With the assumption that the Clarity act passes, what do you think the bitcoin price will be at the end of the year?

[A]

Yeah, I, I, I guess rather infamously, at least in the niche area of people making bitcoin price target calls. I declined to make a call this year. At the end of last year, I said that the investment, investment environment is very chaotic with like, rates uncertainty and wars and tariffs and a, you know, decaying geopolitical order or shifting one and that at the time there was an, the options markets were pricing I think an equal likelihood of 50 or 150k BTC by end of the year a year forward. So I was like, yeah, it's a pretty big range and you know, so and I think I gave a prediction of like 250 by the end of the next year. Willing to, I'm, to be clear, I'm long term bullish. But it's like this year was looking pretty choppy I think, you know, we've been proven right so far on that. I would say now though, and I don't know what the options markets are suggesting or what how traders are positioned for end of year but I, I would say, you know, new all time highs, they're in sight. So I think it's definitely possible. And yeah, the odds go up if Clarity is signed into law. They do. It's a big upside catalyst. I really believe that.

[B]

Alex, thank you so much for coming on the show. Thank you for all of your tireless work and reporting with the Clarity Act. You have been one of my core sources for following it. And so thank you for coming on and just sharing this update. There are a handful of votes to go, so I'm sure we'll bring you back on in the future as we get across those hurdles. And our eyes are on the final bill getting passed. Seven weeks. Seven to nine weeks.

[A]

That's my guess. It could take seven weeks of work. I mean, no joke, not all of that's like human time. You know, sometimes you're working with your AI and it's like, oh, it'll take this long. And then it's like, oh wait, actually that's like, let me put it in human time. Right. But one of the crazy things is that the actual Senate floor consideration is going to take a full week. Like to pass one big bill from the Senate through the Senate takes a week. That's a crazy thing about the Senate. It's just true though. That's. So yeah, there's. Well, I'm sure we'll have more twists and turns to unpack.

[B]

Alex, thanks for coming on the show today. Bangladesh, Asian, you guys know the deal. Crypto is risky. You can lose what you put in. But nonetheless, we are headed west. This is the frontier. It's not for everyone, but we are glad you're with us on the bankless journey. Thanks a lot,

[A]

Sam.