CLARITY Act stalls as spot volumes fall, tokenized stocks grow
Legislative progress on the CLARITY Act is faltering over ethics concerns regarding the president's crypto holdings, while institutional infrastructure like tokenized equities sees record growth despite a broad slump in spot trading.
The CLARITY Act faces a crucial Senate vote before August 10, but its passage is increasingly unlikely as Democratic senators block the legislation over conflicts of interest. Polymarket now puts the odds of the bill passing this year at just 40%. Lawmakers including Chris Murphy, Jeff Merkley and Chris Van Hollen are refusing to support the measure unless it includes a provision banning elected officials from promoting or issuing cryptocurrency.
The opposition centers on President Donald Trump's financial ties to the sector after Senator Elizabeth Warren demanded he release his 2025 crypto earnings, noting his 2024 disclosure showed over $1 billion in revenue, prompting Blockchain Association CEO Summer Mersinger to urge lawmakers to separate the ethics debate from the legislation. "Whatever you decide on ethics, that’s really not our concern," she said. "But please don’t let it kill all the hard work that we put in the rest of the bill."
This political uncertainty arrives as broader crypto trading volumes contract significantly. Spot trading volume across the top 10 centralized exchanges fell to $1.95 trillion in the second quarter, down from $2.7 trillion in the first quarter, according to CoinGecko. Perpetual futures volume dropped 10% to $12.7 trillion, and the stablecoin market edged down 1.6% to $305.1 billion.
Prediction markets were the sole bright spot, recording a record $113.8 billion in notional volume for the quarter. However, the sector faces its own regulatory headwinds as France's National Gambling Authority ordered internet service providers to block Polymarket, classifying it as illegal gambling.
While spot trading flounders, tokenized equities are gaining ground with institutional investors. The market capitalization of tokenized stocks hit a record $2.3 billion, led by Ondo Finance at $955 million, Kraken's xStocks at $507 million and Binance's bStocks at $334 million. Ethereum holds the largest network share at 34%, followed by BNB Chain at 30% and Solana at 23%.
Traditional finance infrastructure is accelerating its involvement in the space. The Depository Trust & Clearing Corporation, which safeguards $114 trillion in assets, launched a tokenized securities trial with over 40 financial firms. Concurrently, the US and UK treasuries issued joint recommendations advocating for one-to-one backing of stablecoins with high-quality liquid assets and cross-border testing of tokenized assets.
Regulatory implementation, however, remains sluggish. US agencies missed a Saturday rulemaking deadline for the GENIUS stablecoin act. Missing the deadline does not invalidate the law, but it reduces the compliance window for issuers before the rules take effect in January.
