[00:00] Well, here it is. The cloture vote on the Clarity Act is failing. You can see right now at the time of this, we're at a 48 yes, a 48 no.
[00:12] Even if you had a simple majority on yes, it would not be enough to get cloture on the Clarity Act. This is bearish for crypto. Let's explain exactly what's going on.
[00:24] First, what even is cloture? And then what is the Clarity Act and what are the problems with it and why is it not getting passed? Okay, cloture is simply a way to say, hey, let's put a time frame on when we're going to end debate.
[00:38] We're going to pass cloture with 60 votes. You need 60 to do it. Then we have 30 hours to finish debating this, and then we can introduce little amendments, and then we can vote to pass it.
[00:50] If you pass it in the Senate, it then has to get reconciled with the House, where you pass a similar version of the House, which would be expected to get done because you don't need as much of a majority in the House as you need in the Senate.
[01:02] Unfortunately, Democrats have essentially blocked this from passing. Because this cloture act is failing, I don't think we can get to 60 votes anymore. We're already 48-48 out of 100.
[01:15] Because this is dead, this is likely dead until 2027. Which, yes, in the short term, that is bearish. Some of the crypto-enthusiasm that the Clarity Act would have actually got the path.
[01:28] Given the compressed timeframes that Congress now has between now and midterm, just literally three legislative weeks left, it's highly unlikely you're going to get this reintroduced before then.
[01:43] John Boone has already argued that, look, we've already made our legislative calendar. we don't, I mean there's a small chance they can reintroduce it, but if John Thune is saying we're not going to reintroduce this if it fails, it probably
[01:56] is not going to happen again. It's really seen as like a waste of time. Basically Congress has decided anything can happen. We'll have to reintroduce it next year. Obviously the problem with trying to reintroduce this next year is if you reintroduce this next year
[02:10] what happens? You might have a divided Congress. Because after midterms, Republicans might not sweep both the House and the Senate, and if you have a divided Congress, Democrats might stand in the way of this actually getting done.
[02:23] Now, what is the goal of the Clarity Act, and why are Democrats standing in the way of some of it? The overall goal of the Clarity Act has been to make it clear, get it?
[02:35] Clarity. That the SEC is not going to be the primary regulator over digital commodities like cryptocurrencies or tokens. Instead, it would be the Commodities and Futures Trading Commission.
[02:47] Why is that desirable? It's desirable because a lot of people see the CFTC as more of a, hey, the people who deal with commodities are big boys, they can wear their own pants, they can take their own responsibility into their own hands,
[03:02] and they need less hand-holding or babysitting than securities like regular stocks that a regular person like you or me might buy on a daily basis, regulated by the SEC.
[03:15] So in essence the SEC is generally associated with more retail take don and therefore you get more stringent rules CFTC is usually associated with trading professionals who generally have looser oversight and looser
[03:32] regulation. This is why the crypto lobby has really been pushing the SEC out and the CFTC in. This would have made that clear. The Trump administration has already been trying their
[03:44] best in getting the crypto sort of industry to deal with fewer cases from the SEC. Remember, Coinbase was getting sued by the SEC. That case, that 2023 case, got dropped once Trump took over.
[03:58] We actually covered that case on this channel in some of the hearings that were going on. Coinbase, honestly, was looking like they were going to win anyway. But the cases got dropped Once Trump took over, he installed a very pro-crypto SEC head.
[04:13] The SEC also dropped cases against Gemini, against Justice Son of Tron, along with many others. And so crypto has already come under the purview of fewer SEC lawsuits.
[04:25] But the Clarity Act would make it more law that even in the future, if a Democratic president comes in and a Democratic, you know, SEC comes in, the SEC isn't going to step in and start suing all these crypto firms again.
[04:40] The Clarity Act would have finally done that. That would have been bullish for crypto. Unfortunately, that is not what's happening right now. This bill is dying. And so you don't get that clarity over who has regulated authority.
[04:54] You also don't get clarity that stablecoins are allowed to have a yield, like money markets. Certain stablecoins that offer a yield now operate in a bit of a gray zone, which subjects them to lawsuits.
[05:09] And that's exactly what these brokerages don't want. There's also been a concern about dividing some of the functions of these brokerages. For example, should clearing be handled at the same entity that provides brokerage services?
[05:26] is. All of that gets a little bit into the weeds of how duties are segmented at these companies, in addition to not just clearing and brokering. But what about deposits? So banking style deposits
[05:40] in crypto, should those be handled in a similar way that they might be handled at a broker? A lot of these things are separated in sort of our modern financial system, and people are trying
[05:52] to bring some of those ideas to crypto. And the Clarity Act was supposed to help resolve that, even though a lot of those components were still being debated. So that market structure was a little loosey-goosey.
[06:05] Exchanges, brokerages, trading desks, and financial markets, all separate. Banks, separate from brokerages, right? That's your traditional financial market.
[06:18] Those things were also likely subject to amendment, likely subject to reconciliations between the House and the Senate but none of that really matters right now because this is failing. Closure is not happening. There's no way it can happen. You need 60 votes. It ain't happening.
[06:32] Another thing they were trying to get done was a liability shield for developers of tokens or coins The Republican thesis here was that would foster more innovation especially in DeFi Democrats wanted more narrow shields
[06:46] because they thought if developers had exploitable coins and then people got lug pulled, that they should end up being liable for some, developers should have some liability. Obviously, the crypto community wants less liability.
[07:00] Okay, so those were just some of the things that the Clarity Act would have given us answers on, right now, dead in the water. No 30 hours of floor debate, no amendments,
[07:12] probably not happening until 2027, and if we get a split Senate and House, even 2027 is dead for the Clarity Act, which does suck because it leaves you with a lack of clarity.
[07:25] Okay, what were some of the other Democratic issues here? Another big one was Donald Trump, frankly, himself. Donald Trump, the Trump meme coin, the Melania coin, World Liberty Financial,
[07:40] all of those people who got rug pulled by all of those Trump projects, who basically just wired money directly to Donald Trump's bank account for his own profit, given that Donald Trump made $1.4 billion on crypto in 2025.
[07:55] $1.4 billion. That's more than he made in real estate. That's more than he pretty much made in any other aspect of growing his wealth. 1.4 in crypto, while things like the Melania coin tanked 99%.
[08:08] That has been the poster child of getting the Clarity Act blocked by Democrats. Democrats have looked at that and said, look, we need clear ethical standards where government officials are restricted based on what they are able to trade or create around crypto.
[08:26] Like, do we really want to see a World Liberty Financial or a Trump coin or a Melania token or whatever? Do we really want to see that or enable that? And what kind of rules should we have around that? Those rules really weren't even decided yet because they would have been subject to a lot of amendment and reconciliation.
[08:42] We just haven't even gotten to that stage of this yet. But that was a poster child for Democrats voting against this. Another poster child for voting against this was the banking lobby. There are a lot of community banks that were fearful, like smaller community banks that were fearful,
[08:57] and maybe even like a J.P. Morgan, were fearful that there would have been a deposit slight. A deposit flight would basically say people are going to take their money out of their banks. So, you know, collecting nominal money market yields or worth next to zero savings account yields.
[09:17] And they would have thrown that money into stable coins. Throwing that money in stable coins would have obviously been good for companies like Circle or Coinbase or whatever.
[09:29] And bad for banks. The economic argument here was if you take too much money out of the banking system, then the banking system can't lend enough money to continue supporting ongoing artificial intelligence developments or continuing to support lending for homes, personal credit, credit cards, auto loans, buy now pay later loans or whatever.
[09:55] and you would have ended up having this tightening of financial conditions via less credit availability and then the economy would have collapsed So that was some of the fear-mongering that was going on.
[10:09] I think a lot of that was overblown. I think the Clarity Act could have passed and you wouldn't have seen that much of a flight of capital from banks. Yeah, some people would have moved money from banks to get stablecoin yields, but honestly
[10:21] I don't think, I think that was a little overblown, I'll put it that way. but the banking lobby has been really anti-this because anything that reduces their ability to lend is considered bearish.
[10:34] So that's where we basically have this motion to invoke cloture failing. That puts the Clarity Act dead in the water until 2027 which is the next congressional legislative session
[10:49] that will begin at the beginning of January. and if we get to the bottom line on how this is affecting crypto related stocks we can see that Coinbase has sold off about 10%
[11:02] just within the last hour here has been most of the damage you can see Circle is down about 10% still up from its lows earlier I will say I personally still believe that over time
[11:18] the usefulness of stablecoins has been damaged by FedNow and real-time payments. I know that sounds like a weird claim,
[11:31] but I think that's a longer-term issue for actual transactional use growth. But in the short term, you know, Bitcoin has actually moved up quite a bit, and that's driven up, as well as hopes for the Clarity Act passing,
[11:43] has actually driven up Circle or Coin or others on enthusiasm that it could pass. That obviously didn't happen. And so we've seen Bitcoin now lose 76. It'll probably come back.
[11:55] The bigger issue for Bitcoin, honestly, is breaking through 81. I don't know why Bitcoin really cares much at all about this. I think it's more of maybe an ecosystem broadening, more money coming in to Coinbase means maybe more people buy Bitcoin.
[12:08] I think Bitcoin, honestly, doesn't give two Fs about stablecoins. But it would have been more of an impact for, like, Ethereum and level 2 base products that could be built on top of Ethereum.
[12:23] So it doesn't surprise me that Ethereum is down a little bit more, 3.6 compared to Bitcoin, too. But this gives you an overview of the Clarity Act and how this is basically dead in the water. It's unfortunate.
[12:36] And, yeah, here, I'm just now getting the headline, Senate blocks crypto-friendly Clarity Act. The Clarity Act voted down amid concerns about Trump's crypto ties.
[12:49] There you have it. So, all I can say, and I think it's the best way to put it, at this point when it comes to the Clarity Act failing, is of course... Oh, there you go. Your book, Kevin, just left. Oh, that's okay.
[13:03] I am with you. I'm trying to not advertise these things that you told us here. I feel like nobody else knows about this. We'll try a little advertising and see how it goes. Congratulations, man. You have done so much. People love you. People look up to you. Kevin Passelaster, a financial analyst, and YouTube up, meet Kevin.
[13:17] Always great to get your take.