Key facts
- Jefferies warns that political uncertainty surrounding the Clarity Act could fuel volatility in crypto markets.
- The bill faces significant hurdles in the Senate, with passage odds at 48% by year-end 2026.
- Key concerns include ethics provisions, illicit finance, and limited legislative time.
- Passage of the Clarity Act would establish clear rules for digital asset regulation by the SEC and CFTC.
- Delays could prolong regulatory uncertainty, potentially slowing institutional adoption of blockchain services.
- Jefferies expects volatility in crypto-linked equities such as Circle, Coinbase, and Bullish.
Jefferies has warned that the Clarity Act faces significant hurdles in the Senate, potentially leading to increased volatility in cryptocurrency markets and related equities. The bill, which aims to establish clear regulatory frameworks for digital assets, passed the Senate Banking Committee earlier this year but faces challenges related to ethics provisions, illicit finance concerns, and a tight legislative calendar. Polymarket currently estimates a 48% chance of the bill's passage by the end of 2026, a decrease from 70% in mid-May.
Lawmakers have approximately 20 legislative days before the August recess to reconcile different Senate versions of the bill with the House version and send it to President Donald Trump. Analysts at Jefferies noted that failure to pass the bill before the recess could push it into the following year, especially if the Senate's political composition changes in the November elections.
The Clarity Act is considered crucial for the crypto industry as it would define whether digital assets are regulated as securities by the SEC or commodities by the CFTC, thereby reducing years of regulatory uncertainty. Proponents argue that this legal clarity would encourage greater institutional adoption by making it easier for banks, asset managers, and exchanges to offer tokenized products, custody services, and other blockchain-based financial offerings.
Jefferies believes that the bill's passage would provide the necessary regulatory foundation for institutions to expand services like tokenization, custody, and staking. It could also accelerate the development of tokenized securities, broaden the range of crypto exchange-traded funds beyond Bitcoin and Ether, and potentially revive the pipeline for crypto infrastructure IPOs.
However, a delay in passing the bill would prolong regulatory uncertainty. While recent guidance from the SEC, CFTC, and OCC has offered some clarity, these agency actions could be reversed by future administrations. This uncertainty might cause regulated financial institutions to slow down their blockchain initiatives as they reassess legal and compliance risks.
The investment bank anticipates that the legislative process will drive volatility in crypto-linked equities, including Circle, Coinbase, and Bullish. For Circle, the bill's current form could potentially slow the growth of its USDC stablecoin by closing a loophole that allows third parties to offer rewards on USDC holdings. Conversely, a delay might provide Circle more time to expand its payments network and diversify its revenue streams.
JPMorgan had previously indicated that the proposed U.S. crypto market structure bill might have a limited window for passage this year due to the congressional calendar and unresolved debates over stablecoin yields.