JPMorgan warns crypto market structure bill faces shrinking path to passage before midterms. (CoinDesk)
What to know:
JPMorgan said the window for Congress to pass the Clarity Act this year is narrowing as the midterm election calendar tightens.
Debate over whether stablecoins can offer yield remains the biggest obstacle, with banks and crypto firms divided on the issue.
Restrictions on passive stablecoin yield could drive more capital toward tokenized Treasuries, money-market funds and tokenized deposits, the bank said.
The bill cleared the Senate Banking Committee on May 14, but must still secure 60 votes in the full Senate, be reconciled with House legislation and receive the president’s signature. Those remaining steps, coupled with growing pushback from the banking industry, have lowered expectations that the measure will be enacted this year, the analysts said.
Timing could also prove significant. A compromise reached before the midterms could look materially different from one negotiated after the elections, when political incentives may shift.
The Clarity Act is widely viewed as the crypto industry’s most important legislative priority because it would establish the first comprehensive federal framework governing digital assets in the U.S.
Supporters say the bill would resolve long-running uncertainty over whether cryptocurrencies fall under the Securities and Exchange Commission (SEC) or Commodity Futures Trading Commission (CFTC), replacing years of regulation-by-enforcement with clearer rules for issuers, exchanges and investors.
Industry advocates argue that greater regulatory certainty could unlock institutional participation, encourage investment and innovation, and help keep crypto businesses and capital in the U.S. rather than overseas markets with more developed digital-asset regimes.
A central point of contention is the treatment of stablecoin yield. The bank’s analysts said the legislation is intended to prohibit “passive” yield, effectively interest paid on stablecoin balances, while allowing rewards tied to activity such as payments, transactions, loyalty programs and trading incentives. However, the bill’s current language is less explicit about banning interest on balances than policymakers have suggested.
The distinction is critical because it determines whether stablecoins can function as substitutes for bank deposits, according to the report. The carveout is designed to preserve stablecoins’ role in payments and settlement while preventing them from evolving into lightly regulated savings products.
Banks have pushed for tighter restrictions, arguing that stablecoin issuers do not face the same insurance, supervisory and prudential requirements as regulated depository institutions. Crypto firms, meanwhile, have sought greater flexibility to offer yield-bearing products. JPMorgan said the dispute has become a major obstacle to advancing the legislation and remains politically sensitive.
Should lawmakers ultimately impose effective limits on passive stablecoin yield, the bank expects the trend of idle crypto capital flowing into tokenized Treasuries, digital money-market funds and tokenized deposits to accelerate.
While that outcome may disappoint crypto-native firms that have advocated for yield-bearing stablecoins, the bill would still preserve some activity-based rewards. The report also emphasized that the current legislative text leaves room for interpretation because it does not explicitly prohibit interest on balances.
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The Defend Developers PAC is aiming to contribute to lawmakers who seek to shield crypto developers from legal vulnerabilities.
What to know:
A new political action committee called Defend Developers has been established, joining the ranks of other crypto PACs such as Fairshake.
This one will focus on giving to incumbent politicians who already support establishing legal protections for crypto developers and decentralized finance.
