The CLARITY Act is expected to pass by mid-year! JPMorgan: "8 Major Bullish Factors" ignite the cryptocurrency market in the second half of the year

As the cryptocurrency market sentiment remains subdued, Wall Street investment bank JPMorgan Chase’s analysis team offers reassurance. They expect that legislation targeting the structure of the U.S. crypto market could be enacted by mid-year and serve as a major bullish catalyst in the second half of the year.

Led by Managing Director Nikolaos Panigirtzoglou, the team states in their report: “Although market sentiment remains negative, we firmly believe that the market structure bill is likely to pass in the middle of the year, which will provide a strong boost to the market in the second half.”

This legislation, widely known as the “Digital Asset Market Clarity Act (CLARITY Act),” aims to establish a clear and comprehensive regulatory framework for the U.S. cryptocurrency industry.

The CLARITY Act was passed in the House of Representatives last year with bipartisan support and is currently under negotiation in the Senate. The main sticking points are two major disputes:

• Stablecoin Yield Debate: Crypto companies are actively seeking to offer interest and rewards to stablecoin holders; banks strongly oppose this, fearing it could drain deposits from traditional financial systems and threaten financial stability.
• Conflict of Interest Politics: Democrats propose restrictions that prohibit high-ranking government officials, including the President and their families, from participating in crypto-related financial activities to avoid potential conflicts of interest.

The White House has held multiple closed-door meetings with crypto industry representatives and banking groups, and market expectations suggest there is still room for compromise. Analysts emphasize that once the bill passes, it will fundamentally reshape the crypto market structure. This would not only bring regulatory clarity and end the era of “enforcement replacing regulation” but also significantly promote asset tokenization and attract more institutional investors.

Passing the CLARITY Act will trigger “8 Major Bullish Factors”

JPMorgan analysts state that if the bill is enacted, it could bring eight potential bullish impacts:

1. Establish clear token classification and open the door for exemptions: The bill will create a clear categorization system: “Digital commodities” regulated by the Commodity Futures Trading Commission (CFTC); “Digital securities” regulated by the Securities and Exchange Commission (SEC). This will greatly reduce compliance burdens for mainstream tokens. A “Grandfather clause” will allow assets like XRP, Solana (SOL), Litecoin (LTC), Hedera (HBAR), Dogecoin (DOGE), and Chainlink (LINK), which are linked to ETFs, to be directly included under the more lenient CFTC commodity regulation without retroactive application.

2. Provide a grace period for startups: The bill permits projects to raise up to $75 million annually during their transition to decentralization without full registration with the SEC. Analysts say this will help foster innovation and support venture capital activities in the U.S. market.

3. Facilitate the “conversion from securities to commodities”: Tokens initially issued as securities that meet “sufficient decentralization” standards and where issuers no longer hold control can be transformed into “commodities.” This is expected to promote broader secondary market trading and allow institutional investors to trade confidently through traditional brokerages.

4. Clarify intermediary regulations: The bill sets clear registration and custody standards for crypto intermediaries. This effectively paves the way for traditional financial giants like BNY Mellon and State Street to directly engage in digital asset custody services.

5. Accelerate tokenization of real-world assets (RWA): The bill clarifies that “tokenized securities” remain subject to existing securities laws. Major players like ICE and State Street are already preparing infrastructure for the tokenized market.

6. Exemptions for miners, validators, and developers: Miners, node validators, and software developers who do not engage in custody activities can be exempt from broker-dealer registration requirements, promoting open-source innovation while remaining under regulation once the system is operational.

7. Small transaction tax exemptions and staking tax clarity: The bill offers tax exemptions for small daily crypto payments and clarifies tax treatment of staking, encouraging more people to use cryptocurrencies for payments and increasing the predictability of staking yields.

8. Institutional shift toward “tokenized deposits”: Analysts suggest that if the bill passes, it could weaken the positioning of stablecoins as “investment deposits,” making them more akin to digital cash tools. This may lead institutions to favor traditional bank-issued “tokenized deposits” or seek overseas yield-bearing options like Ethena’s USDe.

Bitcoin’s Long-Term Target Price Could Reach $266,000

Overall, JPMorgan remains optimistic about the crypto market this year. Earlier this month, their analysts reaffirmed a long-term target price for Bitcoin: based on volatility adjustments relative to gold, Bitcoin’s fair long-term value could reach $266,000.

According to CoinGecko, Bitcoin is currently trading at $66,000, down 0.8% in the past 24 hours.

The CLARITY Act must not be delayed! The U.S. Treasury Secretary urges Congress to “pass it quickly” and send it to Trump for signing this spring.