A 50–49 Senate vote that stalled the CLARITY Act has raised the risk that crypto companies will rely on more custodians and permissioned systems, according to GenLayer Labs CEO Albert Castellana.

GenLayer Labs CEO and co-founder Albert Castellana told crypto.news that the Senate result was disappointing because the proposal had been moving toward a principle he considers important: regulation should follow control.

Entities that hold customer funds, decide who may transact, or stand between two parties perform a different role from developers who publish software or users who join an open network, according to Castellana.

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.

HYPE has risen 10.5% to $91.20 after Hyperliquid introduced manual USDC and USDT borrowing against HYPE and Bitcoin collateral, with the token setting a new all-time high of $92.56.

Hyperliquid loans accept HYPE and Bitcoin collateral

Hyperliquid’s official documentation states that manual borrowing went live on Sep. 18, allowing users to borrow USDC and USDT after supplying HYPE or Bitcoin as collateral. The new service runs through HyperCore, the same infrastructure that supports the platform’s portfolio margin system.

“Manual borrowing is supported for Manual/Standard and Unified Account users,” the platform said.

Portfolio margin accounts already handle borrowing automatically, so the separate manual action is unavailable to those users. Manual and unified account holders can instead choose the amount they want to borrow, subject to available liquidity and account-level and global limits.

HYPE collateral has a loan-to-value ratio of 65%, meaning $1,000 worth of HYPE provides up to $650 in borrowing capacity at the applicable oracle price. Bitcoin has a lower LTV of 50%, giving the same collateral value up to $500 in capacity.

When a user supplies both assets, Hyperliquid adds their respective borrowing contributions together. Supplied HYPE and Bitcoin do not earn interest, while supplied USDC and USDT earn interest but do not increase the account’s borrowing capacity.

Borrowed stablecoins accrue interest continuously, with the balance indexed every hour. According to the documentation, rates depend on how much available liquidity borrowers are using. Suppliers receive a lower annual percentage yield than borrowers pay because the interest is divided among a larger pool of supplied assets.

Hyperliquid also retains 10% of the interest paid by borrowers as a reserve for future liquidations. Data cited following the rollout placed total borrowed assets at about $269 million, showing early use of the lending feature.

Liquidation rules depend on collateral value

Hyperliquid uses a health factor to compare a user’s LTV-adjusted collateral with outstanding debt. An account cannot take another loan once its health factor reaches 100% or lower, although crossing that level does not automatically trigger liquidation.

Partial liquidation begins when borrowed value moves above the collateral value after applying the designated liquidation threshold. HYPE has an 82.5% partial liquidation threshold, while Bitcoin has a threshold of 75%.

Falling collateral prices can therefore increase liquidation risk even when the user does not borrow more. Interest charges, collateral withdrawals, and additional borrowing can also move an account closer to the threshold, according to the platform.

In an example provided in its documentation, Hyperliquid used 100 HYPE worth $40 each and a 2,000 USDC loan. The collateral would provide $2,600 in borrowing capacity at a 65% LTV, leaving another 600 USDC available to borrow.

For the same position, the account would reach the 82.5% partial liquidation threshold if the HYPE oracle price fell to about $24.24, excluding further interest. Hyperliquid noted that displayed liquidation prices can change as asset prices, balances, and accumulated interest move.

Multiple forms of collateral make the calculation more complex because the system includes the contribution from every supplied asset. A displayed liquidation price of “N/A” does not necessarily mean a position carries no risk, as the label can appear when another asset covers the debt or when the calculated price sits above the current oracle price.

HYPE price breaks above its previous record

CoinGecko data showed HYPE trading at $91.20 at the time of writing, up 10.5% over 24 hours. The token moved between $81.70 and $92.56 during the period, with the upper end setting its latest all-time high on Sep. 18.

Trading volume reached approximately $1.72 billion over 24 hours, while HYPE’s market capitalization stood near $20.3 billion. The token was also up 57.1% over 30 days, according to the same market snapshot.

The advance pushed HYPE above the $89.57 record set on Sep. 6. In an earlier technical report, crypto.news covered HYPE’s consolidation between roughly $84 and $88 after the previous high, when selling repeatedly appeared above $87.

HYPE later fell toward $78.70 as weaker momentum and legal concerns weighed on the market, before reversing above $90 following the manual borrowing rollout. The move also cleared the former $87–$90 liquidity area identified in the earlier report.

Bitcoin rose alongside HYPE, trading near $80,981 after gaining about 5.6% over the latest session. BTC moved between approximately $76,205 and $80,998 during the period, placing it close to its intraday high when the market data was recorded.

U.S. access remains tied to regulated partners

Hyperliquid’s growing product range has arrived while companies connected to the platform pursue a regulated route into the United States. The Hyperliquid Policy Center has also challenged CME’s lawsuit against the Commodity Futures Trading Commission over the agency’s approval of a Kalshi Bitcoin perpetual contract.

In its Sep. 9 filing, the policy group argued that CME had not shown a competitive injury caused by the CFTC’s decision. The group also said CME’s commercial interests did not fall within the protections of the Commodity Exchange Act provisions cited in the lawsuit.

A separate U.S. proposal involves Payward, the parent company of Kraken. On Sep. 16, Payward announced regulated Hyperliquid markets for eligible American clients through Bitnomial, subject to regulatory approval.

Under the proposed structure, Bitnomial Exchange would deploy and administer selected perpetual futures markets through Hyperliquid’s HIP-3 system. Bitnomial Clearinghouse would handle clearing and settlement, while NinjaTrader Clearing would carry approved customer accounts.

U.S. customers would need to complete onboarding with NinjaTrader Clearing and receive approval for the relevant Bitnomial market. Their associated addresses would also need to appear on the permissioned HIP-3 allowlist, rather than receiving access to every market available through Hyperliquid.

Payward said Hyperliquid would be the first blockchain protocol used for the planned service. The company has not announced a launch date, and CFTC records do not yet establish final approval for the proposed HIP-3 arrangement.