Crypto's Clarity Act Collapses. Two Days Later, the SEC Introduces Its Innovation Exemption

Cody Carbone (0:00)

How far do we want to go to get a bill? At what point are we harming this industry's growth and potential, and the competitive nature for this industry to thrive with other industries? For the Blockchain Regulatory Certainty Act, on the Sunday's release text, they lost the criminal liability shield.

That's exactly what Senator Cortez Masto wanted. It removed all reference to the 1960 criminal statute. And so if you're a non-custodial developer, you have civil liability protections from this bill. You can't be tried civilly, but if someone uses your technology that you've created for some kind of illicit activity, you can still be criminally liable. And that's exactly what we were trying to fight against.

Laura Shin (0:41)

Hi, everyone. Welcome to Unchained, your no-hype resource for all things crypto. I'm your host, Laura Shin. Thanks for joining this live stream. First, we're going to take a quick word from the sponsors to make this show possible.

This episode is brought to you by Oneinch Aqua, the shared liquidity layer from Oneinch, back multiple liquidity positions with one wallet balance, and keep your tokens in your wallet until a swap fills. See how it works at oneinch.com/aqua.

Today's guest is Cody Carbone, CEO of The Digital Chamber. Welcome, Cody.

Cody Carbone (1:16)

Thanks so much for having me, Laura. Good to be here.

Laura Shin (1:19)

The Clarity Act failed to pass the cloture vote that would have allowed it to move to the floor for debate. This caused a lot of consternation on Crypto Twitter.

There was also a lot of finger pointing between the Democrats and Republicans, finger pointing from Crypto Twitter to various politicians of all stripes. What went wrong? What was the ultimate blocker?

Cody Carbone (1:41)

Yeah, it sucks. There's no way to sugarcoat it. It really does. We've been spending years on trying to get this bill over the finish line. Ultimately, politics beat policy.

That's it. This became political. You saw every single Democrat vote no on the motion to invoke closure.

They were aligned together. They weren't going to allow a win here for Republican offices. It's a 630-page bill. Four pages of that is ethics. I know that there were some other issues on the substantive side around BRCA and stable coin yield that we can get into, but ethics really carried the day. And unfortunately, there wasn't enough alignment. And politics won. And that's a pretty sad state of affairs for an industry that has been trying to ask and achieve regulation for so long. And now we have to go to plan B, C, and D, which I think we can, but it's unfortunate.

Laura Shin (2:38)

So I have to ask a spicy question. So I probably align a little bit with the Democrats that Trump's self-dealing and grifting was pretty beyond shameless.

The funny thing is, the timing of this is kind of crazy. Somebody who's not a crypto person, who has a background, I think, in intelligence did an analysis of corrupt world leaders just in the last day or so, and took the UN's definition of corruption, turned it into eight criteria and gave each 100 points, or maybe it was all together it was 100 points, and scored the leaders that history remembers for looting their countries. So like Marco Suharto, Mobufu, Bacha, Putin, beyond anyway, I don't know all of these. I definitely know Suharto though, because I used to live in Indonesia. But anyway, so she put every president, US president since Eisenhower on the same scale, both parties, and she ended up scoring Nixon at a 41 There was no other American president that scored above a 25

But Trump's second administration scored a 91, which puts him in the same league as Suharto and Mobufu and above Marcos and Abacha. So her conclusion was that Trump is quote, not only the most corrupt president in American history, at this pace, he finishes his term level with the most corrupt rulers of the last 100 years. So given that situation, so I understand that I took us out of crypto for a moment, but I understand the ethics provision didn't land in a place that the Dems would be okay with. But I'm sort of wondering, here they are, they have now blocked passing anything. So now the status quo will prevail. So then how does that square with their desire to curb some of this corruption?

Cody Carbone (4:41)

It's bizarre to me that they would take the status quo over. What we've heard Democrats and Republicans both say were 80% of the ethics demands from Democrats. I was shocked. I honestly shocked on Sunday night when we saw the updated text and the president had to agree to state AGs having enforcement power here, to putting his assets in a blind trust. I thought from the first ethics provision that came out several weeks ago, initially from the White House, that was immediately dismissed from Democrats, that that was as far as the president was willing to go. Putting limits on himself, it was unprecedented.