Without clear crypto legislation in the United States, future administrations could exploit regulatory gaps to launch enforcement crackdowns driven by political motivation rather than legal clarity. That warning, from one of Washington’s most prominent crypto policy advocates, underscores a growing concern that the current window for passing comprehensive digital asset rules may be closing faster than the industry realizes.
Peter Van Valkenburgh, executive director of the nonprofit Coin Center, argued that passing the Digital Asset Market Clarity Act of 2025, known as the CLARITY Act, is essential not because of the current political environment but because of what comes next.
“The point of passing CLARITY is not to trust this administration. It is to bind the next one.”
Peter Van Valkenburgh, Executive Director of Coin Center — via CoinTelegraph
The bill passed the US House of Representatives with a bipartisan vote of 294 to 134 in July 2025. It divides crypto assets into three regulatory categories: digital commodities, investment contract assets, and permitted payment stablecoins, while protecting non-custodial software developers from being classified as money transmitters.
Yet the bill has stalled in the Senate, primarily over a dispute about stablecoin yield provisions. An amended Senate proposal bars crypto service providers from offering yield on stablecoin balances. Coinbase responded by stating it “cannot support the bill” under those terms, while traditional banks have opposed any yield-bearing stablecoins entirely.
Enforcement First, Rules Later: How US Regulators Could Act Without a Legal Framework
The United States has no comprehensive federal statute governing digital assets. In the absence of one, regulators have relied on existing securities, commodities, and anti-money-laundering laws to pursue enforcement actions against crypto companies, a practice critics call “regulation by enforcement.”
Under former SEC Chair Gary Gensler, the agency pursued an enforcement-heavy approach, bringing cases against exchanges and token issuers using the decades-old Howey test. The CFTC simultaneously asserted jurisdiction over crypto derivatives and spot markets. The DOJ pursued fraud and AML cases using statutes written long before digital assets existed.
Van Valkenburgh warned that this legal ambiguity leaves developers exposed. Without statutory protections, he said, developers of privacy tools could be prosecuted as unlicensed money transmitters. He described the current legal environment as “a very bad state of the world right now,” where regulators can selectively target or protect developers depending on political winds.
Van Valkenburgh put the problem bluntly in a separate interview with Decrypt: “They can effectively go after developers when they want to go after them, and then claim to be pro-developer when they want to claim to be pro-developer.”
A recent article in @theragetech, “US Government to Bring Patriot Act to Digital Assets” suggests that the Treasury is in the process of banning privacy tools.
There are important issues raised here but I want to offer some nuance and color about what exactly is happening and… https://t.co/Ucxrg6iXEi
— Peter Van Valkenburgh (@valkenburgh) September 11, 2025
Source: @valkenburgh on X
The pattern is not hypothetical. The Gensler-era SEC demonstrated how aggressively an administration can act when it views crypto assets through a hostile lens, even without legislation explicitly granting that authority. The concern is that a future administration could repeat the playbook with even broader targets.
Consumer Safeguard or Innovation Killer? Both Sides of the No-Rules Crackdown Debate
Supporters of aggressive enforcement argue that regulators cannot wait for Congress to act while consumers are being harmed. The collapse of FTX in late 2022 stands as the most prominent example: an unregulated exchange that lost billions in customer funds. Enforcement actions have also shut down Ponzi schemes and recovered investor money using existing fraud statutes.
From the consumer-protection perspective, the absence of crypto-specific rules does not mean the absence of legal authority. Securities law, commodities law, and wire fraud statutes provide tools that regulators can, and arguably must, use to protect retail investors from bad actors.
On the other side, industry groups and legal scholars argue that retrofitting laws written for traditional finance onto novel digital assets creates due-process problems. Regulated parties cannot know in advance what conduct is prohibited when agencies apply vague legal standards on a case-by-case basis. This dynamic has already driven companies to exit the US market, citing legal uncertainty.
The stablecoin sector illustrates the tension well. The CLARITY Act’s stablecoin yield dispute pits crypto firms seeking to offer competitive financial products against banks that view yield-bearing stablecoins as a threat to their deposit base. Coin Center policy director Jason Somensatto noted that the stablecoin yield debate has “stalled progress on the US crypto legislation for over a year,” with the next Senate markup meeting scheduled for April 13, 2026.
Neither side has a clear advantage. Consumer advocates point to real losses from fraud. Industry advocates point to real innovation being pushed offshore. The legal ambiguity serves neither group well, and both are waiting on Congress to resolve it.
What Investors and Crypto Businesses Should Watch as Enforcement Risk Grows
The most immediate signal is the Senate’s handling of H.R.3633. Whether lawmakers resolve the stablecoin yield dispute at the upcoming April markup will determine if the bill can advance before the November 2026 midterm elections, which, according to observers covering the legislation, represents the practical deadline for passage.
Prediction markets reflect cautious optimism. Polymarket’s contract on whether the CLARITY Act will be signed into law in 2026 showed approximately 61% probability as of March 26, 2026, with trading volume of roughly $440,800.
For those tracking broader market sentiment, agency leadership transitions are a leading indicator of enforcement posture. Political appointments to the SEC, CFTC, and Treasury signal whether incoming officials lean toward accommodation or crackdown. Court rulings in ongoing cases continue to shape the boundaries of agency authority.
Investors watching crypto regulation globally should note that the US is not acting in isolation. Other jurisdictions are moving faster on comprehensive frameworks, which increases the competitive pressure on Congress to finalize domestic rules.
For retail investors, the practical takeaway is straightforward: the regulatory environment for crypto in the US remains unsettled. Whether the CLARITY Act passes or fails, enforcement actions will continue under existing law. The difference is whether those actions follow clear statutory boundaries or rely on the discretion of whichever administration holds power.
Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Cryptocurrency and digital asset markets carry significant risk. Always do your own research before making decisions.
