The future of the Digital Asset Market Clarity (CLARITY) Act has become increasingly uncertain as the U.S. Senate prepares to begin its summer recess.
With limited time left before lawmakers leave Washington, the likelihood of the legislation advancing this year has fallen, raising concerns across the cryptocurrency industry.
According to wealth manager Bernstein, the Senate’s failure to pass the bill could have an immediate impact on market sentiment.
“From a tactical standpoint, we expect the crypto market to bottom and start showing momentum towards late Q3 and early Q4 prior to the mid-terms” Bernstein analysts wrote in a Monday report shared with Cointelegraph.
Prediction of market data also reflects growing skepticism. Polymarkets currently place the odds of the CLARITY Act becoming law before the end of 2026 at 31%, down from previous estimates.
Meanwhile, lawmakers continue discussions on a bipartisan ethics proposal that could influence broader negotiations surrounding digital asset legislation.
Short-Term Risks for Crypto Valuations
Bernstein warned that failing to approve the CLARITY Act could trigger a negative reaction from the cryptocurrency market. The firm said investors may respond by selling digital assets, leading to another decline in Bitcoin price and the wider crypto market.
Despite the possibility of short-term losses, analysts remain optimistic about the market’s longer-term direction. They believe crypto assets could regain strength later this year as investors anticipate renewed political and regulatory momentum ahead of the U.S. midterm elections.
The CLARITY Act is designed to establish the first comprehensive regulatory framework for digital assets in the United States.
Supporters believe the legislation would provide greater legal certainty for the crypto industry, while critics argue that parts of the proposal could create an uneven playing field between crypto companies and traditional financial institutions.
The banking industry has expressed concerns that the current version of the bill would allow crypto firms to offer yields on stablecoins without being subject to the same regulatory requirements imposed on banks.
Regulators May Fill the Policy Gap
Even if the Congress does not pass the CLARITY Act this year, Bernstein believes federal regulators could move forward with additional guidance for the digital asset sector.
The firm pointed to Project Crypto, a regulatory initiative first introduced by SEC Chairman Paul Atkins and later expanded into a joint effort between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).
The initiative aims to develop a workable regulatory framework for digital assets while Congress continues debating broader legislation.
Bernstein said regulators could issue more interpretive guidance on the classification of digital tokens, establish clearer rules for decentralized finance (DeFi), and accelerate innovation exemptions that would temporarily allow certain token issuances to avoid securities classification.
Such regulatory actions could provide the crypto industry with greater clarity even without immediate congressional approval.
While uncertainty surrounding the CLARITY Act continues to weigh on market sentiment, increased regulatory engagement could help support the industry’s long-term development as policymakers work toward a comprehensive legal framework.
