Bernstein warns Clarity Act failure could spark another crypto selloff

The Clarity Act is widely viewed as the crypto industry’s most important piece of U.S. legislation, with supporters arguing it would establish clear rules for digital assets, reduce regulatory uncertainty and unlock broader institutional adoption. Analysts say passage would improve market sentiment by giving banks, asset managers and exchanges greater confidence to invest in blockchain infrastructure and expand crypto products.

Bernstein’s analysts said they expect regulators to move more quickly on token classifications, decentralized finance (DeFi) guidance, self-custody rules and innovation exemptions for token issuance, while continuing to support tokenization, crypto derivatives and prediction markets.

The Clarity Act remains strategically important because it would provide permanent regulatory certainty, encourage banks, broker-dealers and exchanges to invest in blockchain infrastructure, clarify the division between securities and commodities oversight and establish a long-term framework for decentralized finance and digital assets regardless of future political administrations, the report said.

Even if the legislation stalls, the broker expects the crypto industry’s political influence to remain strong ahead of the U.S. midterm elections and sees the current downturn ending in late third or early fourth quarter, helped by the prospect of further White House policy support.

For listed companies, failure to pass the bill would preserve the status quo for stablecoin regulation.