Jefferies warns that the Clarity Act faces significant hurdles in the Senate, which could prolong regulatory uncertainty and impact crypto markets.
Jefferies highlights that delays in the Clarity Act could prolong regulatory uncertainty and impact institutional crypto adoption.
Jefferies has issued a cautionary note regarding the Clarity Act’s uncertain future in the Senate, suggesting that its passage is crucial for enhancing institutional adoption of digital assets. The bank notes that while the bill has made it through the Senate Banking Committee with bipartisan support, it faces significant challenges due to dwindling legislative time and unresolved political issues.
Currently, the likelihood of the Clarity Act passing by the end of 2026 has decreased to 48%, compared to 70% earlier in the year, according to Polymarket. This decline is attributed to concerns surrounding ethics, illicit finance, and the limited time lawmakers have to reconcile different Senate versions of the bill before the August recess.
Analysts at Jefferies, led by Andrew Moss, have warned that if the bill does not pass soon, it may face further delays into next year, especially if there are shifts in Senate control after the elections. The Clarity Act is seen as vital for establishing clear guidelines on the classification of digital assets, which would resolve years of regulatory ambiguity.
If enacted, the legislation could create a stable regulatory framework that financial institutions need to innovate with tokenized products and blockchain services. Jefferies predicts that this could lead to a surge in the development of tokenized securities and expand the scope of crypto exchange-traded funds beyond just Bitcoin and Ethereum.
On the flip side, any further delays could extend the current state of regulatory uncertainty, causing financial institutions to hesitate in pursuing blockchain initiatives. The analysts expect that fluctuations in crypto-related equities, such as Circle, Coinbase, and Bullish, will become more pronounced as the legislative situation unfolds.
Jefferies also highlighted potential implications for Circle, noting that while the bill could close existing loopholes that benefit USDC, a delay might allow the company to strengthen its payments network and diversify its revenue streams. Ultimately, the bank believes that increasing competition from banks and fintechs could pose a greater threat to Circle than the legislative hurdles it currently faces.
As the midterm elections approach, the window for passing the Clarity Act is narrowing, with JPMorgan also indicating that the opportunity for legislative progress this year is limited due to the crowded congressional calendar and ongoing discussions about stablecoin yields.
