Bernstein has warned that crypto markets could face another downturn if the CLARITY Act fails to pass this year, though the brokerage expects U.S. regulators to move faster with rulemaking to reduce uncertainty for the industry.
In a report released Monday, Bernstein said the outlook for the legislation has weakened as the Senate faces a shrinking window before its scheduled recess. The analysts noted that lawmakers had already settled several major disputes, including debates over stablecoin yield provisions, but the bill’s timeline remains uncertain.
“CLARITY is the most important crypto market structure bill in U.S. history, but the probability of it passing in 2026 appears to be declining,” analysts led by Gautam Chhugani wrote.
Bernstein said a failure to approve the legislation would likely spark an immediate negative reaction from digital asset markets. However, the firm expects any decline to be temporary, with the SEC and CFTC likely to accelerate regulatory initiatives through President Donald Trump’s Project Crypto agenda.
The CLARITY Act is widely regarded as a major regulatory milestone for the U.S. crypto industry. Supporters argue that the legislation would establish clearer digital asset rules, reduce uncertainty, and encourage greater institutional involvement. Analysts believe a defined framework would give banks, investment firms, and exchanges more confidence to expand blockchain services and launch additional crypto products.
Bernstein expects regulators to continue advancing guidance on areas such as token classifications, decentralized finance regulations, self-custody policies, and innovation-focused exemptions for token launches. The firm also expects ongoing support for tokenization, crypto derivatives, and prediction market development.
The analysts emphasized that the long-term importance of the CLARITY Act extends beyond short-term market sentiment. If passed, the bill would create lasting regulatory clarity, define oversight responsibilities between securities and commodities regulators, encourage investment in blockchain infrastructure, and establish clearer rules for decentralized finance and digital assets.
Even if the legislation does not move forward, Bernstein believes the crypto sector will retain significant political influence ahead of the U.S. midterm elections. The firm expects the current market weakness to potentially ease by late Q3 or early Q4 as investors anticipate additional policy support from Washington.
For publicly traded crypto companies, a stalled CLARITY Act would likely maintain the current stablecoin regulatory environment.
Bernstein said Coinbase (COIN) would likely continue offering rewards on unused stablecoin balances, while Circle (CRCL) would remain unable to directly provide yield as an issuer but could continue benefiting from revenue-sharing partnerships. The brokerage added that renewed growth in USDC circulation would be an important catalyst for both companies.
JPMorgan also recently cautioned that declining odds of CLARITY Act passage this year could weigh on the crypto sector, warning that extended delays may weaken one of the industry’s most significant regulatory drivers.
