Crypto Rally at Risk of Reversal If Market Structure Bill Stalls, Bernstein Says

Bernstein has cautioned that crypto markets could see another decline if the CLARITY Act fails to become law this year, though the brokerage believes U.S. regulators may respond by speeding up efforts to create clearer digital asset rules.

In a research note published Monday, Bernstein said the bill’s chances have weakened as the Senate faces limited time before its upcoming recess. The firm noted that lawmakers have already resolved several major sticking points, including disagreements over stablecoin yield provisions, but uncertainty around passage remains.

“The CLARITY Act represents the most important crypto market structure legislation in U.S. history, but the odds of it passing in 2026 appear to be falling,” analysts led by Gautam Chhugani said.

Bernstein expects a failure to advance the bill could initially weigh heavily on digital assets, triggering a negative market reaction. However, the firm believes any downturn would likely be temporary as the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) continue expanding regulatory efforts through the Trump administration’s Project Crypto initiative.

The CLARITY Act is viewed by many industry participants as a critical step toward establishing a clearer regulatory environment for cryptocurrencies in the United States. Supporters argue that the legislation would reduce uncertainty, improve investor confidence, and encourage broader institutional participation in blockchain markets.

Analysts said clearer rules would allow banks, asset managers, and crypto companies to make longer-term investments in blockchain technology and develop new digital asset products with greater confidence.

Bernstein expects regulators to prioritize areas including token classifications, decentralized finance (DeFi) oversight, self-custody frameworks, and innovation exemptions for token issuance. The brokerage also sees continued progress in sectors such as tokenized assets, crypto derivatives, and prediction markets.

The firm emphasized that the importance of the CLARITY Act extends beyond short-term market performance. A successful passage would create a durable regulatory structure, clarify the responsibilities of securities and commodities regulators, support blockchain investment, and establish clearer guidelines for decentralized finance regardless of future political leadership.

Even if the legislation does not pass, Bernstein believes crypto’s political influence will remain strong ahead of the U.S. midterm elections. The firm expects the current market downturn could ease toward the end of the third quarter or early fourth quarter as investors anticipate additional policy support.

For publicly traded crypto companies, a stalled bill would likely leave stablecoin regulations largely unchanged.

Bernstein said Coinbase (COIN) would likely continue offering rewards on unused stablecoin balances, while Circle (CRCL) would remain restricted from directly offering yield as a stablecoin issuer but could continue benefiting from partnerships that share distribution revenue. The brokerage added that renewed USDC supply growth would be an important factor supporting both companies.

JPMorgan recently issued a similar warning, saying declining chances of CLARITY Act passage this year represent a setback for the crypto industry and that further delays could weaken one of the market’s biggest regulatory catalysts.