The Senate’s 50–49 vote against moving forward with the CLARITY Act has raised concerns that some crypto companies could rely more heavily on custodians, restricted platforms and centralized controls, according to GenLayer Labs CEO Albert Castellana.
The vote fell 10 votes short of the 60 needed to begin debate on the bill. Castellana said the result was disappointing because the legislation had been moving toward a principle where regulation would depend on who actually controls a financial activity.
He explained that companies holding customer funds, deciding who can transact or acting as an intermediary play a different role from developers who publish software or users who participate in open blockchain networks.
Without clearer rules, Castellana said companies could respond by adding custodians, limiting access to their applications or keeping centralized controls to make their products easier to explain from a legal perspective.
In his view, these individual decisions could eventually bring back some of the intermediaries that crypto was designed to reduce.
The Senate vote blocked immediate consideration of a framework that would divide regulatory responsibilities between the Securities and Exchange Commission and the Commodity Futures Trading Commission.
The proposed legislation would give the CFTC authority over qualifying digital commodities and registered spot-market intermediaries, while the SEC would continue overseeing assets and transactions covered by securities laws.
The bill also included provisions involving decentralized software developers, stablecoin rewards, government ethics and prediction-market contracts. It also proposed treating XRP as a digital commodity in certain secondary-market transactions, regardless of Ripple’s holdings.
Castellana said regulatory uncertainty does not necessarily stop companies from building new products. Instead, it can influence how those products are designed.
He pointed to possible responses such as adding a custodian, making a frontend permissioned, using a centralized provider, blocking U.S. users or keeping an administrator key that gives someone clear control over the system.
For American users, those choices can affect whether they interact directly with a blockchain protocol or through a company-controlled service that can impose identity checks, restrict transactions or prevent certain users from accessing the platform.
Castellana said the key question should be who has the actual power to force an outcome.
He argued that developers who simply publish code should not automatically be treated the same as people or companies that can freeze funds, move assets, stop transactions, change rules or override results.
He also noted that different parts of the same crypto product can have different levels of control. A protocol could be open and permissionless while its frontend is controlled by a company. Another network could have independent validators but still give an administrator the ability to change its rules.
The GENIUS Act has already established federal rules for payment stablecoin issuers, including requirements related to reserves and redemptions. Castellana said this provides more clarity around stablecoins themselves, but leaves broader questions about the applications and financial systems built around them.
Stablecoins are increasingly being used in areas such as decentralized finance, self-hosted wallets and trading applications. This creates further questions about when a company is acting as a regulated intermediary and when it is simply providing software.
The SEC has also continued working on separate rules involving tokenized securities. Castellana pointed to recent steps that could allow blockchain-based systems to maintain securities ownership records and support tokenized stocks on public blockchains, although access to trading venues remains controlled and some measures are temporary.
Meanwhile, Bitwise CIO Matt Hougan has taken a more measured view of the Senate setback. He previously warned that failure to pass the CLARITY Act could slow the crypto market, but after the vote he described the situation as a “speed bump, not a roadblock.”
Hougan pointed to continued development by major financial and crypto companies despite uncertainty around the bill. He cited new blockchain products, crypto investment products and tokenized stock settlement as examples of activity continuing without the legislation being finalized.
The failed Senate vote also came with a broader market decline. Bitcoin fell 3.7%, Ethereum dropped 5.2% and XRP declined 7.3%, while reported liquidations reached $669 million.
Hougan argued that SEC and CFTC rulemaking could allow parts of the crypto industry to continue developing even without a new law, although agency rules could potentially be changed by a future administration.
Castellana also applied his control-based approach to AI agents that can negotiate agreements and initiate transactions. He said people and companies that give AI systems authority over funds should remain responsible for those decisions.
He argued that “the AI did it” should not become an excuse when an automated system enters an agreement or makes a financial decision.
GenLayer is developing a system where AI agents can establish terms, acceptable evidence and collateral requirements before entering agreements. If a dispute occurs, independent validators would review the evidence, while participants would have an opportunity to challenge the result.
The House previously passed H.R. 3633 by a 294–134 vote, but the Senate developed different language. If lawmakers revive the legislation, the Senate version would still need to go through the House or be reconciled between the two chambers before it could reach the president.
