What’s next for Bitcoin price as CLARITY Act stalls?

Bitcoin could face a longer period of regulatory uncertainty after the CLARITY Act stalled in the U.S. Senate, although the setback has not changed BTC’s current classification as a digital commodity.

According to a Sept. 22 report from Bitplanet Research Lab, the failed Senate vote primarily delayed efforts to put the definition of digital commodities and a regulatory framework for spot markets into federal law. The SEC and CFTC’s existing interpretation of Bitcoin remains unchanged.

The Senate rejected a cloture motion to begin consideration of H.R. 3633 on Sept. 15 by 49 votes to 50, with one senator not voting. The motion needed 60 votes to advance, meaning lawmakers never reached the amendment process or a final vote on the legislation.

As crypto.news reported after the vote, Bitcoin faces less regulatory uncertainty from the setback than altcoins, decentralized finance platforms, exchanges and token issuers. Attention has instead moved toward how the SEC and CFTC use their existing powers while legislation remains stalled.

Bitcoin faces limited immediate impact from the CLARITY Act setback

Bitcoin’s existing regulatory treatment provides some insulation from the failure of the bill.

The SEC and CFTC issued a joint interpretation on March 17 that placed crypto assets into five categories, including digital commodities, digital collectibles, digital tools, stablecoins and digital securities. Bitcoin was among the assets specifically named as examples of digital commodities.

The agencies’ joint crypto interpretation identified BTC alongside Ether, Solana and XRP, among other assets, as digital commodities rather than securities. The interpretation did not replace the Howey test, meaning securities laws can still apply depending on how an asset is offered or sold.

The distinction limits what the failed CLARITY Act vote immediately changes for Bitcoin. Bitplanet said BTC continues to be treated as a commodity under the March interpretation, while the legislative setback concerns the rules surrounding the market in which it trades.

Under the House passed version of the CLARITY Act, digital commodity exchanges, brokers and dealers would have been required to register with the CFTC. Spot trading conducted through entities registered or required to register with the regulator would fall under its exclusive supervision.

Without the legislation, the CFTC still lacks statutory authority to supervise the entire digital commodity spot market, according to the report. Bitcoin therefore keeps its current classification, while the federal registration and supervision regime intended for exchanges and intermediaries remains unfinished.

Bitcoin’s commodity status remains based on agency interpretation

A longer term issue for Bitcoin is that its current regulatory treatment has not been written into federal law.

Bitplanet noted that the SEC and CFTC interpretation is neither a statute nor a binding rule. BlackRock cited the same distinction as a risk factor in the second quarter report for its iShares Bitcoin Trust, noting that a court or future administration could reach a different conclusion.

SEC Chair Paul Atkins has similarly argued that legislation is needed to prevent future regulators from reversing current policy.

The CLARITY Act would have provided a statutory definition of digital commodities and established the regulatory structure surrounding their spot markets. Its failure to clear the Senate procedural hurdle leaves Bitcoin dependent in part on the existing interpretation while Congress considers whether to revisit the legislation.

A crypto.news analysis of digital commodities in June noted that the March classification was interpretive and could be revised by a future administration. The CLARITY Act was designed to put the digital commodity category into federal statute.

For Bitcoin, Bitplanet said the current classification would need to be reassessed if the SEC and CFTC withdrew or amended their March interpretation or if a federal court reached a different conclusion.

Bitcoin ETF flows show the initial market impact has faded

Bitcoin and crypto related markets reacted sharply when the Senate vote failed, although the selloff did not persist.

The 12 U.S. spot Bitcoin ETFs recorded $450.4 million in combined net outflows on Sept. 15. Fidelity’s FBTC lost $214.8 million, while BlackRock’s IBIT posted $161.7 million in withdrawals. The daily total was approximately 2.8 times the $159.9 million net inflow recorded during the previous trading session.

Bitcoin fell 3.39% from $78,316 to $75,663 based on the aggregate price data used by Bitplanet. Coinbase closed 10.10% lower and Circle dropped 11.41% during the same session.

Bitplanet cautioned against treating the CLARITY Act vote as the sole cause. The vote occurred during the Federal Reserve’s September meeting, while interest rates and oil prices were affecting risk assets at the same time. The report said those variables prevented it from isolating the regulatory component of Bitcoin’s decline.

Selling pressure subsequently reversed. Bitcoin rebounded 5.8% to $80,890 on Sept. 18, while spot Bitcoin ETFs recorded $159.5 million in net inflows on Sept. 17 and another $433 million the following day. Short liquidations occurred during the rebound, making it difficult to attribute the recovery solely to regulatory developments.

BTC has since extended its recovery. Bitcoin climbed above $86,000 and briefly touched $87,000 on Sept. 22, its highest level since late January, as falling oil prices, lower Treasury yields, short covering and returning institutional demand supported the move.

HashKey Group senior researcher Tim Sun told crypto.news that ETF inflows confirmed the rally instead of initiating it, while describing short term ETF flows as tending to move with Bitcoin’s price rather than predict its direction.

The recovery has left BTC well above the level seen immediately after the failed Senate vote. Bitplanet identified continued spot ETF flows as one of the factors to monitor, noting that the four trading sessions between Sept. 15 and Sept. 18 still produced a cumulative net outflow of $153.8 million despite the inflows during the final two sessions.

SEC and CFTC rules could determine what comes next for Bitcoin

With the legislation stalled, both regulators are moving ahead with crypto related measures using their existing authority.

CFTC Chairman Michael Selig said in August that staff had been directed to review a crypto asset market structure rule that could proceed under existing statutory powers. The White House Office of Information and Regulatory Affairs received the CFTC’s “Regulation Crypto Asset Transactions and Regulation Crypto Asset Markets” proposal on Sept. 17. The filing was still at the prerule stage when Bitplanet published its report, and its substance had not been made public.

The SEC moved separately after the Senate vote. On Sept. 17, the regulator introduced a five year Innovation Exemption covering qualifying tokenized stock trading platforms and liquidity providers.

Under the five year SEC exemption, eligible tokenized securities venues can facilitate trading in tokenized National Market System stocks through permissioned automated market makers and liquidity pools, subject to conditions covering shareholder rights, trading limits and smart contract transparency.

Bitcoin could have a role in those markets. Bitplanet said trading pairs that exchange eligible tokenized stocks directly against non security crypto assets such as BTC can fall within the exemption. The measure does not change Bitcoin’s classification or give the CFTC authority over the entire spot market.

Congress could still revisit the CLARITY Act. Sen. Thom Tillis voted against the Sept. 15 cloture motion in a way that allowed him to file a motion to reconsider and formally requested reconsideration immediately after the vote. Any second cloture attempt would still require 60 votes to advance.