Now, former House Financial Services Committee Chairman Patrick McHenry is arguing that the cryptocurrency industry has itself to blame. In a November 6, 2026 interview with journalist Eleanor Terrett, McHenry offered a remarkably candid assessment of what went wrong, criticizing industry participants for rejecting achievable compromises in pursuit of legislation that was politically unattainable. His message was straightforward: the cryptocurrency industry had an opportunity to secure meaningful regulatory clarity, held out for something better, and ultimately walked away with nothing.
For cryptocurrency businesses operating in the United States, McHenry’s comments raise an uncomfortable question: Did the industry sacrifice achievable legal certainty in pursuit of a perfect regulatory framework that may now be years away?
McHenry: The Cryptocurrency Industry Had Its Chance and Blew It
McHenry has been among the most influential congressional advocates for cryptocurrency legislation. During his tenure as Chairman of the House Financial Services Committee, he helped advance legislation intended to clarify how federal securities and commodities laws apply to digital assets.
His criticism therefore carries considerable weight. In remarks reported following his appearance on Bloomberg Television, McHenry accused cryptocurrency industry participants of rejecting workable legislative compromises because they believed they could obtain more favorable terms. He also acknowledged that he shared responsibility for the outcome.
That admission is significant because the CLARITY Act’s failure cannot fairly be attributed to any single participant. The negotiations involved cryptocurrency companies, traditional financial institutions, congressional Republicans and Democrats, and competing political priorities. Nevertheless, McHenry’s broader point deserves serious consideration.
There is a meaningful difference between rejecting legislation that would impose unworkable requirements and refusing to accept legislation because it does not address every industry concern. McHenry appears to believe that the cryptocurrency industry crossed that line.
What Happened to the CLARITY Act?
The CLARITY Act was intended to address one of the most persistent problems facing cryptocurrency businesses: uncertainty over which federal regulator has jurisdiction over particular digital assets and transactions. The legislation sought to establish clearer responsibilities for the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), along with registration requirements and compliance standards for digital asset businesses.
The House passed the legislation on July 17, 2025, by a bipartisan vote of 294–134. However, the Senate proved considerably more difficult. On September 15, 2026, the Senate voted on whether to proceed with consideration of the CLARITY Act. According to the Senate’s official voting record, the motion failed 49–50, falling short of the 60 votes required to invoke cloture.
Importantly, this was a procedural vote rather than a final vote on the legislation itself. Nevertheless, the result effectively stalled the bill and left the cryptocurrency industry without the comprehensive federal regulatory framework it had sought.
Why Did the CLARITY Act Fail?
McHenry’s criticism focuses on the industry’s unwillingness to compromise, but the legislative breakdown involved several overlapping disagreements.
1. The Industry Wanted More Than Congress Could Deliver
One particularly contentious issue involved whether cryptocurrency platforms should be permitted to pay interest or rewards on stablecoin balances.
Coinbase CEO Brian Armstrong was a prominent advocate for preserving stablecoin rewards, putting his company at odds with traditional banks. The $GENIUS Act, enacted in 2025, prohibited permitted payment stablecoin issuers from paying interest or yield directly to holders. However, it did not impose an equivalent blanket prohibition on rewards offered through third-party platforms such as cryptocurrency exchanges. Traditional banks argued that allowing cryptocurrency platforms to offer interest-like payments on stablecoins would encourage consumers to move deposits out of banks, potentially reducing the funds available for lending.
Coinbase took the opposite position, arguing that consumers should be permitted to earn rewards on their stablecoin holdings and that banks were attempting to limit competition. The disagreement had significant consequences for the CLARITY Act. In January 2026, Coinbase withdrew its support for an earlier version of the legislation over restrictions affecting stablecoin rewards, contributing to the cancellation of a planned Senate Banking Committee markup.
After months of negotiations, lawmakers reached a compromise in May that would have prohibited interest-like payments for simply holding stablecoins while preserving certain rewards tied to legitimate platform activity. As CoinDesk reported when the compromise emerged, Armstrong ultimately supported moving forward with the revised language.
Nevertheless, the dispute had consumed valuable negotiating time, and banking groups continued advocating for tighter restrictions as the September vote approached. The episode illustrates McHenry’s broader criticism. Rather than prioritizing a comprehensive regulatory framework that would benefit the industry as a whole, individual industry participants sometimes prioritized provisions that directly affected their own business models.
Armstrong’s position was commercially understandable. Stablecoin rewards are an important part of Coinbase’s business, and restrictions on those rewards could affect its competitiveness. But the broader question is whether protecting particular revenue streams was worth jeopardizing an opportunity to obtain comprehensive federal cryptocurrency legislation.
Although the stablecoin dispute was not the sole reason the CLARITY Act failed, it demonstrates how competing commercial interests complicated the negotiations and contributed to delays.
2. Political and Ethics Concerns Became Major Obstacles
Another significant disagreement involved proposed restrictions addressing conflicts of interest among government officials involved in cryptocurrency businesses. Democratic lawmakers raised concerns about public officials and their families maintaining financial interests in digital asset ventures, including businesses associated with President Trump.
Those concerns became increasingly important as negotiations progressed. Republican lawmakers incorporated numerous Democratic proposals into revised legislation, including additional ethics provisions. Nevertheless, the changes failed to secure sufficient support. The disagreement highlights an important distinction between bipartisan support for cryptocurrency regulation and bipartisan agreement over the specific terms of legislation.
3. The Industry Ran Out of Time
As the November 2026 midterm elections approached, cryptocurrency legislation became increasingly entangled with broader political disputes. McHenry has argued that the Senate should have moved the legislation forward earlier, before election-year politics overwhelmed negotiations. During an October 2 interview with CoinDesk, McHenry expressed frustration that the legislation had not reached the Senate floor sooner and suggested that a post-election legislative session might still provide an opportunity for passage. Unfortunately for the cryptocurrency industry, the political environment has now changed substantially.
The 2026 Midterm Elections Changed Everything
The November 2026 elections delivered a significant setback to the industry’s legislative strategy. Democrats won control of both chambers of Congress, fundamentally altering the political landscape that had previously favored cryptocurrency legislation. As CoinDesk reported following the elections, the results substantially diminished the likelihood that the CLARITY Act would advance in its existing form.
The industry now faces negotiations with congressional leadership that may prioritize greater regulatory oversight, stronger consumer protections, and additional restrictions addressing conflicts of interest. This does not necessarily mean comprehensive cryptocurrency legislation is impossible. The bipartisan House vote demonstrated that meaningful support exists across party lines. However, future legislation may require concessions that are less favorable to the industry than those available in 2026. McHenry’s warning is particularly relevant in this context: the legislation that was politically achievable this year may be more favorable than anything Congress is willing to enact in the foreseeable future.
The $GENIUS Act Demonstrates What Legislative Compromise Can Accomplish
The CLARITY Act’s failure is particularly notable when contrasted with the industry’s success in securing federal stablecoin legislation. In July 2025, the United States enacted the $GENIUS Act, establishing a federal regulatory framework for payment stablecoins. Although that legislation does not resolve every issue involving stablecoins, it provides important statutory rules addressing permitted issuers, reserves, redemption obligations, and regulatory supervision.
The contrast is instructive. The stablecoin framework became law, while the broader cryptocurrency market structure framework remains unresolved. McHenry has acknowledged that the decision to pursue stablecoin legislation separately from broader market structure legislation was among the strategic decisions worth reconsidering. Whether combining the two legislative efforts would have produced a better outcome is impossible to know.
Nevertheless, the results raise an important question: Would cryptocurrency businesses be better served by pursuing narrower, achievable legislative reforms rather than insisting on a single comprehensive regulatory framework?
What Does the CLARITY Act’s Failure Mean for Cryptocurrency Businesses?
The most immediate consequence is that cryptocurrency businesses must continue operating under a regulatory framework that was not originally designed specifically for digital assets. Although federal regulators have adopted a more favorable approach toward cryptocurrency innovation, administrative policy changes do not necessarily provide the same certainty as legislation enacted by Congress. Several important areas of uncertainty remain.
Securities Law Compliance
Token issuers must continue evaluating whether their digital assets or associated transactions implicate federal securities laws. Businesses cannot assume that a token falls outside SEC jurisdiction merely because the current administration has adopted a more favorable regulatory approach. Token distributions, secondary market transactions, staking arrangements, and other digital asset activities may still require detailed legal analysis.
Federal and State Licensing
The absence of comprehensive federal cryptocurrency legislation does not eliminate existing licensing obligations. Depending on their activities, cryptocurrency exchanges, wallet providers, payment platforms, and other digital asset businesses may remain subject to federal money services business registration requirements, state money transmitter licensing laws, and specialized state regulatory frameworks. Companies should not assume that favorable federal cryptocurrency policies eliminate state-level compliance requirements.
Changing Regulatory Interpretations
Federal agencies may continue issuing guidance and regulations addressing digital assets within their existing statutory authority. However, administrative interpretations can change, regulatory priorities can shift, and agency actions may be challenged in court. For businesses making long-term investments, those limitations matter. A company that structures its operations around a particular regulatory interpretation could face substantial compliance challenges if that interpretation changes under a future administration. Political support is not a substitute for legal certainty.
Is the CLARITY Act Dead?
Not necessarily. Congress could revisit the legislation during the remaining post-election session, although doing so would require overcoming the disagreements that prevented it from advancing in September. If comprehensive legislation does not pass before the current Congress concludes, lawmakers would need to pursue legislation in the next Congress. That process could involve substantially different legislative priorities and regulatory requirements.
Another possibility is that Congress will abandon the pursuit of a comprehensive framework and instead address specific issues through narrower legislation. Potential areas for targeted reform include digital asset classification, CFTC spot-market jurisdiction, cryptocurrency taxation, and custody requirements. Smaller legislative efforts may prove easier to negotiate, particularly where bipartisan agreement already exists. Nevertheless, without a comprehensive framework, cryptocurrency businesses may continue navigating overlapping regulatory obligations and unresolved legal questions.
Conclusion: The Industry May Have Missed an Historic Opportunity
Patrick McHenry’s criticism of the cryptocurrency industry is unusually blunt, particularly coming from someone who spent years advocating for the legislation the industry wanted. His argument is that cryptocurrency businesses had a realistic opportunity to secure comprehensive regulatory reform but failed to accept the compromises necessary to achieve it. Whether that assessment is entirely fair remains open to debate. The legislation faced genuine political obstacles, disagreements over ethics provisions, and competing priorities among lawmakers and industry participants.
Nevertheless, the outcome is difficult to ignore. The cryptocurrency industry entered 2026 with a supportive administration, favorable congressional majorities, substantial political resources, and bipartisan support for regulatory reform. Despite those advantages, comprehensive market structure legislation failed to advance.
After years of demanding regulatory clarity, the cryptocurrency industry may have squandered its best opportunity to obtain it.
For cryptocurrency businesses, the lesson is straightforward: companies cannot build their futures on the assumption that favorable legislation is always just around the corner. They must operate within the legal framework that exists today, not the one they hope Congress will eventually enact.
How Kelman PLLC Can Help
Kelman PLLC is a law firm focused on cryptocurrency, blockchain, and digital asset matters. Our attorneys advise cryptocurrency businesses on federal and state regulatory compliance, token structures, licensing requirements, and legal risks associated with operating in the United States.
Our services include:
- Token and securities law analysis: Evaluating cryptocurrency offerings, distributions, and transactions under federal securities laws.
- Money transmitter licensing: Assessing federal money services business registration and state money transmitter licensing obligations.
- Digital asset business structuring: Advising exchanges, wallet providers, decentralized finance projects, and cryptocurrency payment businesses.
- Regulatory opinions and compliance: Preparing legal analyses and opinion letters addressing cryptocurrency regulations.
- Regulatory disputes: Representing clients in cryptocurrency-related investigations, litigation, and other legal proceedings.
As Congress continues debating cryptocurrency regulation, businesses should ensure that their operations comply with applicable laws regardless of the political environment. If your company is launching a cryptocurrency product, evaluating U.S. licensing requirements, or seeking guidance concerning digital asset regulation, contact Kelman PLLC to discuss how our attorneys can assist.
Attorney Advertising. This article provides general information and does not constitute legal advice. Contacting the firm does not establish an attorney-client relationship.
