JPMorgan Says CLARITY Act Could Pass by Mid-Year and Spark Crypto Rally

JPMorgan analysts say U.S. crypto markets may rebound later this year if lawmakers pass a long-awaited market structure bill by mid-year.

They believe clearer regulations could boost investor confidence despite the current subdued sentiment. In a recent report, a team led by Managing Director Nikolaos Panigirtzoglou noted that legislative momentum is gradually building. They added that even incremental progress in Washington could help shift investor expectations.

Key Points

• JPMorgan analysts say U.S. crypto markets could gain momentum later this year if Congress passes the CLARITY Act by mid-year.
• The House has advanced the bill, but deliberations in the Senate remain ongoing.
• Analysts believe clearer regulatory frameworks could restore investor confidence and reduce reliance on enforcement-driven oversight.
• The bill would clarify the classification of digital assets, potentially boosting institutional participation in commodities and tokenized securities.
• Provisions could support early-stage crypto fundraising, expand custody options for major banks, and provide tax clarity for small transactions and staking.
• JPMorgan reaffirmed its long-term Bitcoin price target of $266,000, reflecting optimism tied to potential legislative progress.

Legislative Progress and Political Hurdles

The proposed framework, widely known as the CLARITY Act, is designed to establish comprehensive regulatory standards for digital assets in the United States. The House has already advanced the bill, signaling political traction. However, Senate discussions are ongoing, and several key issues remain unresolved.

One of the most contentious debates involves stablecoin rewards. Crypto firms want the ability to offer yield to stablecoin holders, arguing it would make digital dollars more competitive and useful.

Banks, however, warn that such incentives could draw deposits away from the traditional financial system and introduce risks to financial stability. This dispute has emerged as a central obstacle in negotiations.

At the same time, lawmakers are divided over conflict-of-interest provisions. Democrats are advocating restrictions that would prevent senior government officials and their families, including the President, from participating in certain crypto-related financial activities.

Supporters say these safeguards would strengthen transparency and public trust. Meanwhile, critics argue they could complicate and potentially delay passage of the broader legislative package.

Amid these disagreements, the White House has convened private meetings between crypto industry representatives and banking groups to find common ground.  Discussions remain ongoing as policymakers explore possible compromises.

Despite the political hurdles, JPMorgan analysts believe passage of the bill would represent a structural turning point for the industry. In their view, clearer rules could reduce reliance on enforcement-driven regulation, support the growth of tokenization, and encourage deeper institutional participation.

Potential Market Catalysts

Building on that outlook, the analysts identified eight specific ways the legislation could influence the market if enacted.

First, the bill would formally distinguish between digital commodities and digital securities. Accordingly, it assigns oversight of each to the Commodity Futures Trading Commission and the Securities and Exchange Commission, respectively.

This clearer regulatory boundary could simplify compliance for many tokens. A grandfather clause may also allow certain ETF-linked assets, including Solana, XRP, Hedera, Litecoin, Chainlink, and Dogecoin, to qualify as commodities.

Second, early-stage crypto projects could raise as much as $75 million annually without full SEC registration while working toward decentralization. JPMorgan says this provision could foster domestic innovation and reduce incentives for startups to relocate overseas.

Third, tokens initially classified as securities could transition to commodity status once they achieve sufficient decentralization. This pathway could expand secondary market liquidity and attract institutional investors. JPMorgan noted that commodity-style regulation has already helped support institutional participation in Bitcoin and Ethereum derivatives traded on CME.

Fourth, the bill would clarify registration and custody standards for crypto intermediaries. With clear compliance frameworks in place, major custodians such as State Street and BNY Mellon could hold digital assets directly, strengthening institutional confidence.

Other Benefits to the Market

Fifth, the legislation would address the tokenization of traditional financial instruments, confirming that tokenized securities remain subject to existing securities laws. Infrastructure development in this area is already underway at firms such as State Street and Intercontinental Exchange, signaling early institutional commitment.

Sixth, miners, developers, and validators would receive limited exemptions from broker-style reporting requirements during network development. However, these exemptions apply only if they do not perform custodial functions. JPMorgan believes this approach would protect open-source innovation while maintaining appropriate oversight once projects mature.

Seventh, the proposal includes tax exemptions for small crypto transactions and clarifies the tax treatment of staking rewards. These changes could encourage everyday payment usage and provide clearer expectations for investors earning staking income.

Eighth, the framework could redefine the relationship between stablecoins and tokenized deposits. JPMorgan suggests the rules may position U.S. stablecoins more as digital cash than investment instruments, potentially prompting institutions to favor tokenized deposits or offshore yield-bearing alternatives such as Ethena’s USDe.

Market Outlook and Price Targets

Taken together, JPMorgan says these provisions underpin its constructive outlook for the crypto sector. Greater regulatory clarity could reduce uncertainty, improve participation, and support broader ecosystem growth.

Earlier this month, the bank reiterated its long-term Bitcoin price target of $266,000, based on a volatility-adjusted comparison with gold. At the time of writing, Bitcoin was trading near $66,771, down roughly 1% over the previous 24 hours.