The failure of the CLARITY Act to advance through the U.S. Senate before lawmakers begin their summer recess could put renewed pressure on cryptocurrency markets, according to a new report from global wealth manager Bernstein.
The firm believes that if Congress is unable to pass the landmark digital asset legislation, the crypto market could experience another short-term decline as investors react to continued regulatory uncertainty.
Regulatory Delays May Trigger Short-Term Selling
Bernstein analysts said the market is likely to respond negatively if the Senate fails to move the CLARITY Act forward this week.
The report suggests that the absence of a clear federal regulatory framework could spark a short-term selloff across digital assets, with Bitcoin and the broader cryptocurrency market potentially facing another round of downward pressure.
Despite this near-term risk, Bernstein expects market conditions to improve later in the year, forecasting that crypto assets could begin recovering during the late third quarter and early fourth quarter as investors position themselves ahead of the U.S. midterm elections.
Regulators Could Fill the Legislative Gap
While a delayed CLARITY Act may disappoint the market initially, Bernstein believes it could also accelerate regulatory action from U.S. agencies.
The report argues that both the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) may expand their efforts under Project Crypto, a joint initiative designed to establish practical regulatory guidance while Congress continues debating comprehensive legislation.
Analysts expect regulators could issue additional guidance covering:
- Digital asset classifications
- Token taxonomy
- Decentralized finance (DeFi) regulations
- Innovation exemptions for token issuers
- Securities law treatment of emerging blockchain projects
Such measures could provide greater regulatory clarity even if comprehensive legislation remains delayed.
Odds of Passage Continue to Decline
Market sentiment surrounding the CLARITY Act has weakened in recent weeks.
Prediction market participants now estimate only a 31% probability that the legislation will become law before the end of 2026, reflecting declining confidence that lawmakers can reach bipartisan agreement within the current congressional calendar.
The lower probability comes as Senate lawmakers prepare to begin their August recess, leaving limited time to finalize negotiations before legislative activity slows.
White House Reviews Bipartisan Proposal
Efforts to revive the legislation continue behind the scenes.
Reports indicate that the White House is reviewing a bipartisan ethics proposal developed following negotiations between Republican and Democratic senators.
The revised framework seeks to address concerns surrounding ethics enforcement while preserving the broader regulatory structure proposed under the CLARITY Act.
Whether the compromise can attract sufficient bipartisan support remains uncertain.
Industry Seeks Long-Awaited Regulatory Clarity
The CLARITY Act is widely viewed as one of the most significant pieces of cryptocurrency legislation currently under consideration in the United States.
If enacted, the bill would establish the country’s first comprehensive regulatory framework governing digital assets, defining the responsibilities of federal regulators while creating clearer rules for exchanges, token issuers, decentralized finance protocols, stablecoins, and blockchain developers.
However, the proposal has also faced criticism from parts of the traditional financial sector, with some banking groups arguing that the current draft could allow cryptocurrency firms to offer yield-bearing stablecoin products without being subject to the same regulatory standards imposed on conventional financial institutions.
Markets Remain Focused on Washington
For now, investors are closely monitoring developments in Washington as the Senate’s legislative window narrows.
While Bernstein expects any failure to advance the CLARITY Act could weigh on crypto prices in the short term, the firm believes continued regulatory progress through the SEC and CFTC may ultimately provide the clarity needed to support longer-term institutional adoption and market growth.
The coming weeks are expected to play a crucial role in shaping both U.S. cryptocurrency policy and broader investor sentiment across the digital asset market.
