Without rules that recognize the difference, he said companies may respond by adding custodians, restricting access or placing another intermediary between users and blockchain applications.
“Every one of those decisions can look reasonable on its own. But you do that enough times, and suddenly you’ve rebuilt most of the intermediaries crypto was supposed to get rid of.”
CLARITY Act failure could encourage centralized safeguards
The Senate voted 50–49 against invoking cloture on H.R. 3633, leaving the proposal 10 votes short of the 60 required to open formal debate.
As crypto.news previously reported, the failed motion blocked immediate consideration of a framework that would divide oversight between the Securities and Exchange Commission and the Commodity Futures Trading Commission.
The proposal would have given the CFTC authority over qualifying digital commodities and registered spot-market intermediaries. The SEC would have retained jurisdiction over assets and transactions governed by securities laws.
Other provisions addressed decentralized software developers, stablecoin rewards, government ethics and prediction-market contracts that could conflict with state or tribal gambling rules. A revised classification framework also would have treated $XRP as a digital commodity in secondary-market transactions, regardless of Ripple’s holdings.
Castellana said regulatory uncertainty does not necessarily cause companies to stop developing products. Instead, legal concerns influence how they design and offer them.
“You add another custodian. You make the frontend permissioned. You use a centralized provider because it’s easier to explain to lawyers. You block the US. You keep an admin key because somebody wants a clear responsible party,” he said.
For American users, such decisions can determine whether they retain direct access to a protocol or must use a company-controlled interface that can restrict transactions, impose identity checks or exclude US residents.
Control provides a test for deciding who should face regulation
Rather than asking whether an entire project is decentralized, Castellana proposed examining where each system places the power to force an outcome.
“For me the simplest test is: who can actually force an outcome? Can you freeze my money? Move it? Stop my transaction? Change the rules underneath me? Override the result? If you can, then you have control.”
Publishing code does not necessarily give a developer control over the finished protocol, he said. Operating one validator or owning governance tokens also may not provide enough power to determine what happens to funds or transactions.
Different parts of the same product may distribute authority in different ways. Castellana cited a permissionless protocol with a company-controlled frontend as one possible structure, while another network could use independent validators but retain an administrator key capable of changing its rules.
“I would much rather regulate the place where the power actually exists,” he said.
The distinction matters for developers because market-structure legislation has included protections intended to separate passive software development from regulated financial activity. With the Senate motion defeated, federal agencies retain responsibility for interpreting existing securities and commodities laws unless Congress revives the proposal.
Stablecoin rules leave DeFi and wallet questions unresolved
The GENIUS Act has already created clearer requirements for payment-stablecoin issuers, including rules for reserves and redemptions. Castellana said the law resolves an important part of the regulatory question, but its focus remains on the money rather than the applications built around it.
“So I don’t think stablecoin payments are waiting for CLARITY. They aren’t. But we are getting clarity on the money faster than we are getting clarity on the economy that will be built around it.”
Once stablecoins enter decentralized finance, custody products, self-hosted wallets or trading applications, companies must still decide whether a participant acts as an intermediary or merely provides software, according to Castellana.
The SEC’s work on tokenized securities offers one example of regulation proceeding through separate measures. A Sep. 11 report covered the agency’s proposed 60-day rulemaking process for transfer agents, which would permit blockchain-based systems to maintain securities ownership records.
Castellana said the SEC has also opened a path for tokenized stocks to use public, permissionless blockchains, although access to trading venues remains controlled and the exemption is temporary.
“Maybe that’s a reasonable bridge for now,” he said. “The risk is that bridges have a habit of becoming permanent infrastructure.”
For US investors, blockchain settlement alone does not determine whether a token gives its holder legal ownership of a share. The issuance structure, official ownership register, custody terms and applicable securities rules continue to determine voting, dividend and other shareholder rights.
Hougan says the bull market does not depend on Congress
Bitwise Chief Investment Officer Matt Hougan has taken a less cautious view of the vote’s effect on crypto prices.
In January, Hougan warned that a failure to pass the CLARITY Act could stall the 2026 bull market. One day after the Senate vote, however, he described the result in a Sep. 16 client memo as “a speed bump, not a roadblock.”
Hougan based his revised view partly on the difference between Bitcoin’s performance and the bill’s declining prospects. Bitcoin rose from a July 1 low of $57,950 to more than $80,000 on Sep. 4, while Polymarket traders reduced the probability of passage.
The immediate vote still caused losses across major crypto assets. BTC fell 3.7%, ETH lost 5.2%, and $XRP declined 7.3%, while liquidations reached $669 million.
Institutional companies also continued developing blockchain products while the bill remained uncertain, Hougan said. He cited Robinhood’s blockchain launch, Morgan Stanley’s Solana ETF and the Depository Trust & Clearing Corporation’s first settlement of tokenized stock trades.
Hougan argued that SEC and CFTC rulemaking could support continued development without a new statute, although he acknowledged that a later administration could reverse agency rules.
AI agents raise another question about control
Castellana applied the same control principle to AI agents that can negotiate agreements or initiate transactions. A company or person that gives an agent authority over funds must remain accountable for that decision, he said.
“I don’t think ‘the AI did it’ can become an excuse,” Castellana said.
Automated agents may eventually enter large numbers of agreements that cannot account for every possible result in advance. Disputes could involve whether work was completed, whether its quality met the agreed standard or whether one party broke the terms.
GenLayer is developing a system in which agents can set terms, acceptable evidence and collateral requirements before entering an agreement, according to Castellana. If a dispute occurs, independent validators evaluate the evidence, while participants retain the ability to challenge the result.
“We need to verify the agreement, the evidence and the process used to reach the outcome,” he said.
The House passed H.R. 3633 by a 294–134 vote in July 2025, but the Senate later prepared different language. Any revived Senate version would still need approval from the House or reconciliation between the two chambers before it could reach the president.
