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Following
BTC Crypto Regulation Developments
The U.S. Senate plans to enter its summer recess around August 7. Wall Street broker Bernstein pointed out that the time window for passage of this year's Digital Asset Markets Clarity Act (CLARITY Act) is actually running out. In a client report released on August 3, a team of analysts led by Gautam Chugani said the bill was the most influential crypto market structure legislation in U.S. history. They warned that failure to pass the bill could trigger an immediate sell-off in Bitcoin and the entire digital asset market.
As of August 3, prediction market platform Polymarket showed a 31% chance that the CLARITY bill will be signed into law before the end of 2026. This number is down 7 percentage points from the previous week and 9 percentage points from a month ago. About $3.7 million has been bet on this outcome.
What the Senate failure means for the crypto market
Bernstein said that any negative market reaction caused by the bill's failure is likely to be short-lived. Analysts expect the crypto market to find a bottom and start to recover at the end of the third or early fourth quarter of 2026, in part due to increased political attention ahead of the U.S. midterm elections. They described the bill's possible failure as "disappointing" and argued that formal legislation would bring lasting regulatory certainty and give banks, broker-dealers and exchanges greater confidence in deploying in the digital asset space.
JPMorgan Chase also pointed out last week that the bleak prospects of the CLARITY Act pose a setback for the crypto industry. The bank said further delays could weaken one of the most important regulatory catalysts in the field. As of Aug. 3, bipartisan negotiations on the bill were continuing, and Republican Sen. Tom Tillis and Arizona Democrat Ruben Gallego submitted a revised moral compromise to the White House last week.
The SEC and CFTC are expected to speed up rulemaking
Bernstein said Senate failure will not hinder regulatory progress. Analysts expect the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) to speed up the rule-making process through the "crypto project." The plan was originally announced by SEC Chairman Paul Atkins in July 2025 and expanded into a joint staff effort with the CFTC in September 2025. The plan uses existing regulatory authority to develop rules for digital assets while waiting for Congress to advance formal legislation.
Bernstein pointed out that regulators may accelerate the advancement of token classification, decentralized finance (DeFi) guidelines, self-custody rules, and an innovative exemption clause that allows token issuers to provide tokens that are not subject to security classification for a specific period of time. CFTC Chairman Michael Selig made similar remarks in an interview with Fox Business Channel last month, warning that if Congress did not act, regulators would eventually make all rules themselves. Selig described the current patchwork of state regulations as harmful to business and said federal standards were critical to certainty and consumer protection.
For stablecoin issuers, the failure of the bill will maintain the current regulatory status quo. Coinbase (COIN) will continue to provide revenue on idle stablecoin balances in accordance with current rules. Circle (CRCL), as a stablecoin issuer, is still unable to directly provide revenue, but can continue to share distribution revenue with partners. Bernstein said the recovery in USDC supply growth was the main catalyst for the two stocks to regain momentum.
