Bernstein predicts further declines for cryptocurrency markets if the Clarity Act fails to progress. The brokerage firm suggested that a lack of legislative progress this year would likely depress crypto prices, though they anticipate U.S. regulators will step up rulemaking efforts.

— According to a Monday note from Bernstein, the failure to enact the Clarity Act would likely negatively impact bitcoin and the broader crypto market in the short term.

— The firm expects the CFTC and SEC to fast-track new regulations under the ‘Project Crypto’ framework, even in the absence of new laws.

— Achieving regulatory certainty is vital for attracting traditional financial institutions, driving tokenization, and fostering crypto innovation.

Wall Street firm Bernstein has stated that if the Clarity Act is not passed this year, it could spark another wave of selling in the crypto sector. However, they argued that U.S. regulatory bodies would likely counter this by accelerating the rulemaking process to provide the industry with more certainty.

In a report released Monday, Bernstein noted that the likelihood of the legislation passing has declined as the Senate approaches its recess, despite the resolution of several contentious issues like stablecoin yield regulations.

“The Clarity Act is the most significant piece of crypto market structure legislation in U.S. history, but the probability of it passing in 2026 appears to be decreasing,” noted analysts led by Gautam Chhugani in the report.

Analysts suggested that failing to pass the bill would likely cause an immediate negative market reaction across digital assets. Nevertheless, they believe the impact would be temporary because the SEC and CFTC are expected to expand rulemaking under the ‘Project Crypto’ initiative of the Trump administration.

The Clarity Act is widely considered the most vital piece of U.S. legislation for the crypto sector. Supporters claim it would create transparent rules for digital assets, mitigate regulatory ambiguity, and facilitate wider institutional adoption. Experts suggest that its passage would boost market sentiment by providing banks, exchanges, and asset managers the confidence needed to invest in blockchain infrastructure and launch new crypto products.

Bernstein’s analysts anticipate that regulators will move more rapidly regarding DeFi guidance, token classifications, self-custody regulations, and innovation exemptions for token issuance, while maintaining support for prediction markets, crypto derivatives, and tokenization.

The Clarity Act is strategically vital because it would establish permanent regulatory certainty, clarify the boundaries between commodity and security oversight, and provide a long-term framework for digital assets and decentralized finance regardless of which political party is in power. This would encourage exchanges, broker-dealers, and banks to invest heavily in blockchain infrastructure.

Even if the legislation stalls, Bernstein expects the political influence of the crypto industry to remain robust leading up to the U.S. midterm elections. They foresee the current downward trend ending in the late third or early fourth quarter, supported by the prospect of increased policy support from the White House.

For publicly traded companies, a failure to pass the bill would maintain the current regulatory landscape for stablecoins.

Coinbase (COIN) would continue its practice of offering yield on idle stablecoin balances, while Circle (CRCL) would remain unable to do so directly as an issuer, though it could continue sharing distribution economics with its partners. The report noted that a recovery in USDC supply growth remains a primary catalyst for renewed momentum in both companies.

JPMorgan (JPM) recently warned that the diminishing chances of the Clarity Act passing the U.S. Senate this year represent a setback for the crypto industry, noting that further delays could weaken one of its most significant regulatory catalysts.

Binance continues to lead the crypto exchange market, expanding its services from derivatives and spot trading into savings, payments, yield, RWAs, and a wider array of financial services.

Why it matters:

Binance remains the dominant crypto exchange, diversifying from spot and derivatives into broader financial services, payments, savings, yield, and RWAs.