Why is the "last mile" of the CLARITY Act not feasible?

Author｜Odaily Planet Daily jk

The "Digital Asset Market Clarity Act" (CLARITY Act) has been stalled in the Senate for over a year since it was passed in the House of Representatives on July 17, 2025, with a vote of 294 to 134. The Senate Banking Committee advanced the bill to the legislative agenda with a vote of 15 to 9 on May 14, 2026, but as of now, the bill has not yet received a full Senate vote or been signed by the President.

Where is it currently stuck? Regarding this matter, Odaily Planet Daily has conducted a detailed analysis. Interested readers can refer to "Just One Step Away: What is Holding Up the CLARITY Act?"

The core of this bill is to classify and define crypto assets: clearly distinguishing whether tokens are securities or commodities, thereby delineating the regulatory authority between the SEC and CFTC, while also covering provisions for users to self-custody private keys, stablecoin yield mechanisms, and registration of overseas exchanges. The main controversy currently hindering the Senate vote is the ethical review clause concerning conflicts of interest for senior government officials regarding crypto assets.

On July 27, Senate Majority Leader John Thune confirmed that the Senate will prioritize handling sanctions against Russia and personnel appointments in the near term, which may delay the voting window for the CLARITY Act until September. Previously, industry and congressional negotiators generally viewed August 7 as the last realistic window for the bill to pass in 2026; missing this window, most analysts believe the chances of the bill being enacted this year will significantly decrease.

Currently, Polymarket data shows that the probability of the CLARITY Act being signed into law this year is only 35%. In February, this number was still 82%.

The probability of Clarity passing this year has been declining. Source: Polymarket

So, if the Clarity Act does not pass, how will the crypto market react? What will happen to Bitcoin? How will related U.S. stocks be impacted? What changes will occur in Washington's political landscape? Odaily Planet Daily will examine these three aspects to see what the industry might face if the CLARITY Act ultimately fails to pass in the Senate.

1. Crypto Market: Analysts Generally Believe the Impact is Limited and the Market has Already Reacted

From the current price behavior, the market's pessimism regarding the CLARITY Act is gradually being reflected. The first sign is the drop in probability from 82% to 35% as reported by Polymarket. From the trend, this probability had risen above 70% multiple times between February and May, but has continued to decline since June, indicating a clear loss of confidence. Currently, the cumulative trading volume has reached $2.845 million.

Bitcoin's price itself has recently come under pressure, fluctuating around $65,000 to $66,000 in late July, with the market generally interpreting this in relation to macro liquidity factors rather than the bill itself.

On the institutional side, most analysts are cautious about the view that "the failure of the bill equals an industry crisis." Compass Point Research & Trading analyst Ed Engel maintains a sell rating on Coinbase but also points out that even if the CLARITY Act fails to pass, there will still be enough industry events in the second half of the year to maintain market attention, and the blockchain industry still has opportunities to prove its practical application value in the next two to three years.

It is worth noting that there are significant points of contention regarding the specific provisions of the bill, and its direction will have very different impacts on different sub-sectors. For example, the stablecoin yield provision in the March draft of the CLARITY Act proposed prohibiting any stablecoin holding arrangements that are "substantially equivalent to interest," which led to a 20% drop in Circle's stock price in a single day and a nearly 10% drop in Coinbase's stock price on the same day. This means that the impact of the bill's failure largely depends on the final details of the provisions rather than whether the bill itself passes.

2. U.S. Stock Market: Will Coinbase and Circle Plummet?

Coinbase

Coinbase's stock performance over the past week. Source: Google

Coinbase's stock price has recently come under pressure as the probability of the bill's passage declines. On July 28, COIN closed at $165, down 3.8% over the past five days, with the decline attributed to selling pressure from the weakening outlook for the bill. In the week of July 24, COIN had dropped from a price level of $169, with Raymond James setting a target price of $158, about 6.5% lower than the then-current stock price; Oppenheimer had previously lowered its target price to $209. Baird reduced its target price from $160 to $142, maintaining a neutral rating.

In other words, institutions believe that if CLARITY does not pass, we are likely to see Coinbase in the $140 - $160 range.

However, most analysts have not directly linked Coinbase's long-term investment logic to the success or failure of the CLARITY Act. Analysts cited by TipRanks believe that even if the bill does not pass before August, Wall Street's trend toward institutional allocation of crypto assets will still support Coinbase's long-term growth. Coinbase is set to release its second-quarter earnings report on July 30, with market expectations for earnings per share of $0.19, a significant improvement from a loss of $1.49 per share in the first quarter. In the long run, if CLARITY does not pass, long-term growth could offset this failure.

Circle

Circle's stock performance over the past week. Source: Google

Circle's situation is relatively complex; some analysts believe that the failure of the bill may not necessarily be bad for Circle. Mizuho analyst pointed out that if the CLARITY Act passes smoothly and brings a clearer regulatory framework, it may actually attract more competitors into the stablecoin space, accelerating the homogenization of stablecoin business and potentially reducing Circle's revenue in the long run. This year, the stablecoin sector has seen the emergence of the Open USD project, supported by over 140 institutions including Visa, Mastercard, Stripe, and BlackRock, posing direct competition to Circle's USDC. Mizuho had previously downgraded its rating on Circle due to this project.

On the other hand, the provisions regarding stablecoin yield restrictions in the CLARITY Act, if ultimately implemented, would weaken Coinbase's high-margin revenue obtained through USDC distribution agreements, thereby shifting bargaining power towards Circle in the renegotiation of their commercial agreement scheduled for August 2026. Morgan Stanley analyst Thielen believes that a stricter federal regulatory framework is generally favorable for licensed issuers with compliance capabilities, asset scale, and credit backing, and Circle stands to benefit in this context. Bitwise Chief Investment Officer Matt Hougan believes that the sell-off of Circle's stock triggered by the bill's draft was "overinterpreted," and that the bill itself does not change Circle's long-term investment logic.

In other words, if CLARITY truly fails to pass, it may be a good thing for Circle's long-term price. In the short term, if sentiment continues to weaken, several repeatedly mentioned support levels are around $61.70, and in more extreme cases, the market has mentioned a possible drop to this year's low of $49 in February.

Crypto Treasury Companies

Crypto treasury companies represented by Strategy (formerly MicroStrategy, ticker MSTR) have a much higher correlation of their stock prices with Bitcoin prices than with the direct association of the CLARITY Act itself, and can be seen as leveraged assets of Bitcoin.

As of July 1, affected by Bitcoin's price dropping below $59,000, MSTR's stock price fell to the range of $85 to $86, marking the eleventh consecutive month of decline, down about 84% from its historical high of around $540 in November 2024. Citigroup analysts have linked their benchmark judgment of Bitcoin reaching $100,000 with expectations for the passage of the CLARITY Act, believing that if the bill passes smoothly and drives Bitcoin to $100,000, the value of Bitcoin held by Strategy will rise to about $84 billion.

Recently, Strategy disclosed that its model estimated the annualized return lower limit for Bitcoin to be -11.34%; if actual returns fall below this level, the company may need to consider restructuring its debt, and two publicly traded companies have already sold a total of 511 Bitcoins within 24 hours to repay about $31.7 million in debt. This financial pressure is relatively independent of the legislative process of the CLARITY Act but may be amplified in an environment where the bill is delayed and market sentiment is weak. Strategy is set to release its second-quarter earnings report during the week of July 30 to 31, and the market expects its stock price volatility to further increase during this period.

3. Washington's Political Landscape: Future Legislation Will Be Difficult

From the Senate's voting structure, whether the bill can pass depends on securing the support of 7 to 9 Democratic senators to break the 60-vote threshold. On the Republican side, Senators Josh Hawley and Rand Paul are expected to vote against it based on substantive positions, which means that even if all 53 Republican senators are present, it will still not be enough to push the bill through alone. On the Democratic side, Arizona Senator Ruben Gallego is seen as a relatively stable source of support.

It is noteworthy that the Democratic resistance to the bill is not solely aimed at the regulatory framework for the crypto industry itself; it is largely related to the over $1 billion in crypto asset investments disclosed by Trump and his family. Several Democratic senators view the ethical clause as a means to counterbalance potential conflicts of interest for the President, and Senator Angela Alsobrooks previously referred to a compromise proposal put forth by the White House as "not a serious proposal." This has, to some extent, tied the legislative process of the CLARITY Act to the larger goal of opposing Trump, rather than being purely a technical debate on industry regulation.

If the bill ultimately fails to pass in 2026, most analysts believe this will not lead to a regulatory vacuum but rather mean that the crypto industry will continue to rely on the existing two paths in the short term: one is the GENIUS Act, which took effect in July 2025, specifically regulating payment-type stablecoins and their issuers; the other is the regulatory agendas being advanced by the SEC and CFTC, with the SEC's Regulation Crypto proposal expected to formally enter the rule-making process in the second half of 2026.

From a timing perspective, the midterm elections in November 2026 are a key variable affecting the subsequent progress of the bill. Most analysts believe that if the window before the August recess is missed, the likelihood of the bill resuming consideration in the fall will be significantly compressed due to disputes over appropriations bills and the approaching election cycle, and substantial progress may have to wait until 2027, which will be in a phase of political reshuffling after the midterm elections, reducing the chances of the bill continuing the previous bipartisan consensus. Some industry lobbyists have proposed an alternative path of incorporating the core provisions of the CLARITY Act into a comprehensive bill that must be passed by the end of the year, but as of now, no senator has publicly confirmed that this strategy is being seriously considered.