Autor Cointelegraph By Felix Ng

Cointelegraph is committed to providing independent, high-quality journalism across the crypto, blockchain, AI, and fintech industries.All news, reviews, and analyses are produced with full journalistic independence and integrity. For more details on our standards and processes, please read our Editorial Policy.

Cointelegraph is committed to providing independent, high-quality journalism across the crypto, blockchain, AI, and fintech industries.All news, reviews, and analyses are produced with full journalistic independence and integrity. For more details on our standards and processes, please read our Editorial Policy.

Cointelegraph is committed to providing independent, high-quality journalism across the crypto, blockchain, AI, and fintech industries.All news, reviews, and analyses are produced with full journalistic independence and integrity. For more details on our standards and processes, please read our Editorial Policy.

A failure to pass the CLARITY Act this week will put the bill in a “walking dead” state, but won’t stop the crypto industry’s march forward, according to Bitwise chief investment officer Matt Hougan. In a blog post on Wednesday, Hougan said while many, including himself, have called it the “make or break” week for the CLARITY Act, the reality is that the crypto industry has made too much progress to “go back in the bottle.” “The reality is that Washington is always late to major technology shifts, and it has rarely mattered as much as people feared,” said Hougan. His comments come as the Senate faces an Aug. 5 deadline to advance the landmark crypto market structure bill before its summer recess, with many concerned that failure to pass this week could see the bill pushed into the next year as lawmakers focus on the midterm elections in November. Prospects for CLARITY this year fadeMarket observers are increasingly pessimistic about the CLARITY Act’s passage this year. In July, Galaxy Research lowered its probability of the CLARITY Act passing in 2026 to 30%, while Polymarket currently shows a 23% chance of it being signed into law this year, down from 82% in February. On July 24, NYDIG global head of research Greg Cipolaro said the latest draft was more complete but still lacked sufficient bipartisan support.“The central investor takeaway is that Republicans have produced a substantially more complete bill, but not yet one with a credible path to 60 votes,” Cipolaro said.According to sources speaking to Punchbowl News, without signs of progress from the White House on a bipartisan ethics deal, and movement on illicit finance and stablecoin yield, Senate Democrats will deny cloture for the crypto bill. Polymarket odds for the CLARITY Act passing in 2026 are at 23%. Source: PolymarketHougan said failure to pass the bill will put it in a “walking dead” state, stalled, but not permanently defeated. He said there is some hope that the bill could pass in September, or even in December, when Congress returns for a lame duck session.“Congress often bundles multiple bills into a year-end “omnibus” package, forcing legislators to vote on a single bill that includes things they like and things they hate. Maybe the Clarity Act can pass that way.”“Crypto will be fine,” Bitwise’s Hougan saysIf the CLARITY Act fails to pass this year, Hougan said that the industry will fall back to the SEC-CFTC’s joint interpretation issued in March, which classifies Bitcoin and other assets as digital commodities and replaces the SEC’s 2019 staff guidance. SEC Chair Paul Atkins reinforced this last week, saying his agency is “ready, willing, and able to come out with rules that address the same issues as CLARITY and other aspects of the crypto market.” Related: CLARITY Act failure could send crypto valuations lower: BernsteinHowever, the rules issued by the two regulators aren’t as durable as legislation, and could be challenged in court or reversed by a future administration. Atkins even acknowledged this in March when the two agencies released the interpretation. Source: Cynthia Lummis“Only Congress can ensure that regulation in this area is future-proofed through comprehensive market structure legislation,” Atkins said.WisdomTree chief legal officer Ryan Louvar has argued that the absence of legislation would continue to impede the market, despite the regulators’ efforts.“A market cannot function well when its participants cannot tell in advance which agency’s rules apply to them,” Louvar said at a July congressional hearing.Hougan said “crypto will be fine” despite this, as it would still give the industry two and a half years to accelerate before a new administration could potentially install a new SEC.“Washington is dysfunctional. It seems crazy to me that we can’t get our act together to pass legislation that would improve investor protections and spark new innovation,” said Hougan.“But it’s not a referendum on crypto’s validity as a pillar of the global financial infrastructure. That ship has long since sailed. At this point, crypto has enough momentum that it will reshape finance for decades, regardless of what happens in the next few days.” Magazine: CLARITY hopes fade, BitMEX shuts as lawsuit looms: Hodler’s Digest, July 26 

A group of six Ethereum researchers and developers, including Ethereum Foundation’s Justin Drake, has proposed changing the network’s issuance policy to cut validator rewards more sharply as the proportion of staked ETH rises. The draft, called the Tapered Issuance Burn and currently being assigned the provisional number EIP-8363, would burn an increasing fraction of validators’ consensus rewards as the amount of staked ETH approaches a fixed threshold of 60.25 million ETH (around 50% of the current ETH supply), at which point the deduction hits 100%. The changes would phase in over 18 months. Tapered Issuance Burn Ethereum Improvement Proposal. Source: GithubThe proposal has triggered backlash from developers, stakers and DeFi founders, who warn that the reward cuts could force out solo validators before larger institutions are affected, weaken institutional demand for ETH, and disrupt DeFi markets built around staking yield. One of the proposal’s authors, Jérôme de Tychey, said the changes are needed to address the rising share of Ether being staked, which passed 33% in April. The authors argue continued staking growth could concentrate ETH in large custodians and liquid staking providers, while unchecked issuance erodes Ether’s role as a neutral, trustless store of value. “Ever-growing issuance is a dilution tax on every holder: stake, or be diluted. At high ratios, LSTs and other staking derivatives displace raw ETH as the ecosystem’s working money, thus swapping the most neutral, trustless asset for intermediated claims on issuers,” he said.Although EIP-8363 remains an early draft, its publication just two days before a deadline for proposals targeting Ethereum’s Hegotá upgrade has also raised concerns about whether there is enough time to consider the impacts on Ethereum’s tokenomics.EIP-8363 authors’ argument to cut issuance The proposal’s authors argue that under the current curve, staking yield never drops below 1.5% even with all ETH in existence being staked. “The incentive to stake never switches off. Where does it stop? It doesn’t,” said de Tychey. With no changes, a worst-case scenario could see more than 55% of Ethereum supply locked in staking by 2028, he said. “Maximal neutrality & minimal dilution: those are the two fundamentals of a store of value. This EIP not only hardens both, it sets a bar no other blockchain clears.” The proposed policy would see issuance peak at 0.5% of ETH supply per year at its highest (around 20% of ETH is staked), declining to zero when the staking ratio of Ethereum hits the 60.25 million ETH threshold. Related: Ethereum treasury firms lean on staking as ETF pressure builds: Report“ETH supply growth will be bounded and more predictable. Combined with the EIP-1559 and Blob burn, the supply will more often decrease. Ethereum, the most mature of all the protocols, with a sustainable security budget, will also be the least dilutive of all protocols,” said de Tychey.The proposal’s broader direction has also received support from Grayscale. In May, Grayscale’s head of research Zach Pandl said limiting staking incentives would be “positive for the price of Ether over time.”Critics say it’s punishing Ethereum’s growthAave founder Stani Kulechov said reducing staking rewards would weaken institutional demand for ETH and borrowing activity across DeFi, arguing the proposal “doesn’t achieve the outcome it tries to achieve and is actually hurtful for Ethereum.” Another argument is that the proposal would impact solo validators as they have generally higher relative costs and are more susceptible to reward changes, leading to a more concentrated validator set. “This will self evidently push out solo stakers who aren’t subsidized by the EF or others,” said Mike Silagadze, CEO of Ether.Fi. “It will essentially guarantee that the only ones staking are large centralized entities with zero cost of capital where users passively hold their ETH.”De Tychey disputed this point, saying on the Ethereum Magicians forum that users of large staking providers must pay fees, making those services less attractive as rewards fall, though he acknowledged the research on this is still contested. The proposed network update will lower ETH issuance and inflation. Source: Zach PandlOthers pointed to the seemingly rushed timeline to consider the proposal, though this appears to be due to confusion over the upcoming deadline on Aug. 6. “This clearly doesn’t leave adequate time for community review of a monetary policy change of this magnitude,” said Greg Koumoutsos, a co-author of EIP-8148 and EIP-8205.Where the proposal currently standsThe Tapered Issuance Burn proposal has not been approved, scheduled or included in Hegotá.While there is an Aug. 6 deadline relating to this proposal, the deadline is for pull requests proposing additional EIPs for Hegotá, not a deadline for deciding which proposals will be included. Ethereum community organizer Trent Van Epps said the selection process could continue until Nov. 8, and that Hegotá is likely to reach mainnet in the second quarter of 2027.Magazine: The 100x obsession: Fundamentals grow in importance as crypto matures