The CLARITY Act Failed - What Happens to Crypto Now?

Ashley Ebersole (0:00)

I also don't think it undercuts the momentum of the industry in general.

John Gillen (0:03)

The Clarity Act has finally failed, for now at least. But how does crypto move forward from here? What is the right and wrong way to do tokenization? And what does all this mean for crypto investors? Hello and welcome to Milk Road Crypto, the show that knows that although it would have been nice to have a bill pass into law, it will be nice to be able to stop talking about the Clarity Act. I'm your host John Gillen. Today is Tuesday, September 15th, and today we are joined by Ashley Ebersole. Ashley is the co-founder and chief legal officer at TX, the tokenization platform born out of Soligentic and Corium and the merger that they just went through. Before that, he was the general counselor at ZeroX. But before any of that, he was actually inside at the SEC. He was in the enforcement division as I understand, which makes him an expert on crypto. If that sounds good to you, make sure you like and subscribe, share this episode with somebody who's going to enjoy it. As a reminder, our podcast today is free and that would not be possible without our wonderful sponsors at Nexo, the digital asset platform that lets you trade, earn and borrow all in one place, keeping you out for more information on them later in the episode. But for now, welcome to the Milk Road Show. Ashley, sir, how are you today?

Ashley Ebersole (1:06)

I'm great. Thanks, John. Great to be here with you. Thanks so much for having me on.

John Gillen (1:10)

I'm glad to talk to you. I wanted to speak with somebody who had some inside information on, or at least some experience, not information, but some experience with the SEC.

The Clarity Act has failed today. What's your reaction to this news out of Washington? And sort of where do you see us going from here now that the bill seems to finally have been killed?

Ashley Ebersole (1:31)

I think Clarity for the second half of this year has looked increasingly doubtful.

As we got farther and farther into the year, you start doing the dance that was done a few times over with Genius Act of, you don't get it in the first six months of the year. And you say, all right, well, maybe before the August recess, that doesn't happen, then it's, okay, well, maybe in the fall before midterms. But the problem is people come back in the fall. And if you're an elected official and you're running for re-election, even if you're not, if so many in your legislature are, that's going to draw a lot of the necessary attention of all those folks who would be needed to drive clarity forward. And then, you know, if it fails again there, then you've got the lame duck, you know. So this happened for a few years with Genius before finally it got the momentum to be passed and to become law. So this, I don't view this as we'll never see these provisions again, we'll never see clarity again. I view this as this round may be unsuccessful this year, but I would expect that it would be reintroduced. I mean, especially or something with the major provisions of clarity would be reintroduced in the new session in the new year.

John Gillen (3:09)

OK, so another version of this may come back at some point. Let's talk about the regulatory side of this as opposed to the legislative side. The SEC and the CFTC have been doing a joint initiative called Project Crypto to try to give some regulatory guidance to the industry. A lot of people are expecting them to sort of step up now that the bill seems to be dead for the moment.

What are your thoughts on this? What are you expecting to hear from these agencies in the aftermath of this vote? And what do you think are the next steps here from the regulatory side?

Ashley Ebersole (3:38)

I think you already saw the market regulators, the SEC and the CFTC, to your point, making moves to take regulatory measures for which they did not need clarity, the Clarity Act. So I would just expect that to continue and to intensify even, because I think you've got very forward-thinking leadership at both agencies, and you've got leadership at both agencies that wants to provide a lot of the...

It's hard, because there's just no better word than clarity. A lot of the clarity that the Clarity Act would have provided, but in terms of legislative measures. So I think I would expect to see them continue to do what they can do without needing any additional legislation and push for finding that these assets are within their regulatory mandate from their authorizing statutes, and that they're going to rule make around them to put in place various of the provisions that you would have seen if clarity had been effective. It's just a question of, if there had been legislation, they would have had to rule make to implement that legislation. Now, in the absence of legislation, they're rule making to fill that gap.