Senate Delay on CLARITY Act Puts Crypto Valuations at Risk, Bernstein Warns

The Senate’s summer recess is closing in fast. And wealth management firm Bernstein is sounding the alarm — without the Digital Asset Market Clarity Act moving forward, the crypto market could take a real hit.

Bernstein put it plainly: if the CLARITY Act doesn’t advance before lawmakers leave town, Bitcoin and broader crypto valuations could slide. The firm’s analysts don’t see market momentum picking back up until late Q3 at the earliest, possibly early Q4. That’s a long wait for a sector that’s been banking on a clear regulatory win from Washington. And right now, that win looks pretty far off.

CLARITY Act Odds Keep Falling

Prediction markets aren’t optimistic. The probability of the CLARITY Act passing this year has dropped to 31%, down noticeably over recent weeks. Around $3.7 million has been wagered on that outcome. Galaxy Digital had already cut its own estimate of passage to 50% as of late June, citing the Senate’s tight timeline before recess. That number has basically kept sliding since.

The bill was designed to build a full regulatory framework for digital assets in the U.S. — the kind of clarity the industry has wanted for years. But it’s hit a wall. The banking sector has pushed back hard, arguing the current draft would let crypto companies offer stablecoin yields without the same level of oversight that traditional financial institutions face. That’s a big sticking point. Banks don’t want to operate under strict capital and compliance rules while crypto firms potentially sidestep them, and that tension hasn’t gone away.

It’s not just the banks. The Senate’s calendar is brutal. The recess is imminent, and there’s simply not much runway left to push a complex piece of legislation through. The window is narrowing by the day.

SEC and CFTC May Step In

So what happens if Congress punts? Bernstein thinks regulators won’t just sit on their hands. The firm’s analysts expect the SEC and CFTC to pick up the slack, probably through Project Crypto — an initiative launched in July 2025 by SEC Chairman Paul Atkins as a joint effort between the two agencies.

Project Crypto is aimed at building a workable regulatory framework for digital assets using existing agency authority, without waiting for Congress to act. The focus would likely fall on token classification — basically, which digital assets count as securities and which don’t — and on rules for decentralized finance platforms, which have been operating in a murky gray zone for years. Bernstein’s report says regulators could speed up rulemaking, issue interpretive releases, and potentially carve out innovation exemptions for certain token issuances.

Related: CLARITY Act Stall Puts Bitcoin at Risk Before Senates August 10 Recess

That’s not nothing. Clearer guidance from the SEC and CFTC could calm some of the market’s nerves, even if it’s not the sweeping legislative fix the industry wanted. But it’s also not the same as law. Regulatory guidance can be reversed. It can be challenged in court. And it doesn’t carry the same weight as a statute passed by Congress.

So the industry is kind of stuck between two imperfect options: wait for legislation that seems less and less likely to arrive on time, or accept piecemeal regulatory moves that might not hold up long term.

Bipartisan Ethics Talks Complicate the Picture

There’s another wrinkle. Separate bipartisan negotiations between Senator Thom Tillis and Democrat Ruben Gallego have produced an ethics proposal the White House is now reviewing. The proposal would let state attorneys general enforce ethics laws against federal officials if the Department of Justice fails to act. It’s a different legislative track entirely, but it’s eating up political bandwidth at exactly the wrong moment for crypto advocates trying to keep CLARITY alive.

That’s the frustrating part. Washington’s attention isn’t unlimited. Every hour spent on ethics enforcement fights is an hour not spent on digital asset legislation. And the crypto lobby has been pushing hard for years to get a bill like CLARITY across the finish line.

More context: Senate CLARITY Act Stalls With 5 Days Left Before Recess and Galaxy Cuts Odds to 30%

The banking industry’s opposition isn’t going anywhere either. Critics of the current draft keep hammering the same point — that allowing crypto firms to offer stablecoin yields without equivalent oversight creates an uneven playing field. It’s a reasonable argument, and it’s found enough sympathetic ears on Capitol Hill to slow things down considerably. Whether the bill’s sponsors can negotiate a version that satisfies both sides before the recess ends is unclear. No details on any revised draft have surfaced.

Bernstein’s broader read is that the market will stay choppy until there’s some resolution, legislative or regulatory. Late Q3 to early Q4 is the firm’s best guess for when sentiment starts to shift. Until then, traders are watching the Senate calendar as closely as any price chart.

Project Crypto’s next moves are probably the most important thing to watch in the short term — per Bernstein, that’s where the action is most likely to come from first.