The CLARITY Act Stalls at 49 Votes, While Deutsche Bank Plans Bitcoin Custody

Last week, I told you Tuesday's vote would tell us plenty about Washington's appetite. It did, just not the way most of us hoped, and the Fed followed a day later with its first rate hike in more than three years.

TL;DR

• The CLARITY Act stalled in a 49 to 50 Senate cloture vote, 11 votes short of the 60 needed to proceed, after negotiations broke down over ethics provisions.

• Deutsche Bank announced plans for regulated digital asset custody for institutional and corporate clients in Europe, with its MiCA license expected in October.

• The Fed raised rates 25 basis points to 3.75%–4.00% in a unanimous vote, its first hike since July 2023.

The CLARITY Act Stalls on the Senate Floor 🏛️

On Tuesday, the Senate voted 49 to 50 on cloture for the CLARITY Act's motion to proceed, 11 votes short of the 60 needed to move the bill toward floor debate.

Here's the part worth understanding: the reported sticking point wasn't the SEC and CFTC market-structure framework institutions have waited years for. Negotiations broke down amid disputes over ethics provisions covering how officials and their family members may hold, trade, and divest crypto, and even the White House agreeing to new ethics language over the weekend wasn't enough to hold a coalition together.

Bitcoin fell below $76,000 toward $75,000, roughly $288 million in Bitcoin long positions were liquidated within four hours per market data (close to $600 million across crypto), and U.S. spot Bitcoin ETFs recorded a $450 million single-day net outflow, the largest since June 25.

The setback leaves the bill's prospects for passage this year uncertain, and one of the biggest obstacles for institutional investors in the US (the fact that their lawyers still can't give them a definitive answer) survives a while longer.

But notice what actually stalled on Tuesday. It wasn’t actually the framework per se. It was a dispute about how Washington's own officials may own the asset class they're regulating.

Senate procedure leaves room to revisit the vote. So, the demand for rules hasn't gone anywhere, and 49 senators were ready to move forward. The “when” just moved again.

Deutsche Bank Says Yes to Bitcoin Custody 🇩🇪

One day after Washington punted, Germany's largest bank moved.

On Wednesday, Deutsche Bank announced plans for a digital asset custody service for institutional and corporate clients in Europe.

The bank will hold Bitcoin, Ether, and selected stablecoins and e-money tokens, managing wallets and private keys on clients' behalf, with tokenized financial instruments on the roadmap. The launch is planned for later this year, subject to completion of the regulatory timeline, and a bank spokesperson told Cointelegraph the MiCA license is expected in October.

Read the target-client categories in that announcement: corporates, asset managers, hedge funds, custodians, brokers, and sovereign institutions. Deutsche Bank doesn't publish demand figures, but the breadth of that list tells you how large the bank sizes the institutional opportunity, and sovereign institutions appearing on a Bitcoin custody prospect list is a detail worth sitting with.

The same week the US Senate deadlocked over who in government may hold Bitcoin, a 156-year-old German bank announced it plans to hold Bitcoin for you, under MiCA, which has been fully applicable to crypto-asset service providers since December 30, 2024.

Europe's framework still has open questions, especially around tokenized instruments, but it gives institutions a licensing path their American counterparts are still waiting for.

The Fed Hikes for the First Time Since 2023 📉

On Wednesday, the FOMC raised rates 25 basis points to a target range of 3.75%–4.00%. The vote was unanimous, and it's the first hike since July 2023, a response to inflation that has refused to settle.

Bitcoin's first reaction was a shrug, followed by a slow drop below $76,000 once Chair Warsh started talking.

I spent my career around this machinery, so let me offer the only take that matters for readers of this newsletter. A central bank raising rates in 2026 is fighting the consequences of money it printed in previous years, and every tightening cycle is a reminder that fiat monetary policy is a pendulum you can't opt out of.

Except you can!

Bitcoin's monetary policy held its schedule through the entire cycle, the way it has through every cycle since 2009. Weeks like this one are why we HODL it, instead of trading it.

Elsewhere in Bitcoin 📖

A quick look at what else has been happening in Bitcoin:

• Strive purchased 469 BTC at an average price of $77,954 per BTC, bringing its holdings to approximately 25,000 BTC as of September 11

• Ondo's subsidiary Oasis Pro Markets became the first tokenization platform to join DTCC's Fund/SERV, the network that processes more than 85% of US mutual fund transactions

• The UK's FCA published final cryptoasset perimeter guidance, with the authorization application window opening September 30

Your fellow stacker in sats,

Patrick Lowry

PS: If you want to see how the value of goods and services changes when priced in Bitcoin, check out the Samara Bitcoin CPI. It might give you a new perspective on holding Bitcoin on your company's balance sheet or just as an individual.

Disclaimer: The opinions expressed in this newsletter are solely those of the author and do not necessarily represent the views of any associated company. This newsletter is for educational and informational purposes only and should not be construed as investment, financial, or any other professional advice. Nothing here is a solicitation, offer, or recommendation to buy or sell any asset or to use any service. Investing in cryptocurrencies is highly speculative and carries a significant risk of substantial financial loss, so you must conduct your own thorough research and consult with independent professional advisors before making any decisions.