Author: Qin Xiaofeng, Odaily Planet Daily
The highly anticipated Digital Asset Market Structure Act (CLARITY Act) has unsurprisingly been delayed once again. Senator Cynthia Lummis previously stated that negotiators expected to finalize a compromise text around July 4th (U.S. Independence Day) and "advance it in July," but progress has clearly lagged.
Now, with the Senate's August 10th recess approaching, the window of opportunity is shrinking rapidly: the bill must meet the 60-vote threshold in the Senate (requiring at least 7 Democratic defections), be reconciled with the text from the Senate Agriculture Committee, merged with the House bill, and signed by the President—all within the next 25 working days. The timeline is extremely tight.
If the window before the August recess is missed, the probability of the CLARITY Act passing this year will further decrease. In fact, data from the prediction market Polymarket shows the probability of the bill passing this year is only 40%; Galaxy Digital has also lowered the probability of passage by 2026 to 50%.
I. Review of the Latest Progress on the CLARITY Act
The CLARITY Act is landmark crypto market structure legislation being advanced in the U.S. Congress, aiming to clarify the regulatory boundaries between the SEC and CFTC, provide a non-security pathway for decentralized tokens, and mandate registration and anti-money laundering obligations for digital commodity intermediaries.
On July 17, 2025, the House of Representatives passed HR 3633, proposed by French Hill, with 294 votes in favor and 134 against, including over 70 votes from Democrats. On May 14, 2026, the Senate Banking Committee advanced and passed it with a 15-9 vote (supported by 13 Republicans and 2 Democrats). On June 1, 2026, the CLARITY Act was officially placed on the Senate legislative calendar (Calendar No. 423), qualifying for full consideration.
However, progress on the CLARITY Act throughout June was not smooth. On June 9th, negotiations over the ethics clause regarding the President's crypto holdings broke down, directly leading to some Democratic lawmakers softening their stance or imposing additional conditions, slowing the pace of the bill reaching the floor for debate. On June 10th, the White House held meetings with police and prosecutor groups. Afterwards, the enforcement battle over Section 604 (the developer protection clause) in the Blockchain Regulatory Certainty Act reached an impasse; if unresolved, law enforcement groups might lobby against it, and Democratic lawmakers might also vote against it for "insufficiently protecting consumers/combating crime."
In simple terms, the former is a "political/ethics hurdle," and the latter is an "enforcement/security red line." Together, they constitute the final two major obstacles before the CLARITY Act can "clear" the Senate. If these are not resolved, it will be difficult to gather the 60 votes and finalize the text, making it impossible to complete the legislation before the August 10th recess. These two sets of negotiations are the key "stumbling blocks" directly hindering the final advancement of the CLARITY Act, causing the July 4th target to be missed and the overall progress to stall. Negotiations are still trying to break the deadlock, but time is running very short.
Brian Gardner, Chief Washington Policy Strategist at Stifel Financial, stated that for the bill to pass in 2026, "it likely needs to pass the Senate by the end of July, preferably in June," and warned that if the Senate misses the recess deadline, the outlook would deteriorate significantly.
However, the market has largely lost hope for the bill's passage this year. Alex Thorn, Head of Galaxy Research, lowered his prediction for the bill passing in 2026 from 75% to 60% on June 5th, citing the increasingly tight Senate schedule. Data from the prediction market Polymarket shows the probability of the bill passing this year is only 40%.
II. What Will Happen to Crypto If the CLARITY Act Fails to Pass on Schedule?
According to CCN's analysis, if the CLARITY Act fails to pass before the August recess, the market's most likely reaction will not be a crash, but rather a "slow bleed through premium products." In fact, the poor performance of cryptocurrencies throughout June indicates that the market has already begun to reprice for legislative uncertainty. (Odaily Note: The premium products here mainly refer to various spot ETFs.)
Data shows that throughout June, U.S. spot Bitcoin ETFs saw cumulative net outflows of approximately $4.5 billion, equivalent to about 77,000 BTC being redeemed. This marks the largest monthly net outflow since the products launched in January 2024, surpassing the previous record from February 2025 (~$3.56 billion), setting the worst monthly record ever.
In fact, XRP might be the asset most directly and significantly affected by the bill, as it would permanently cement its commodity classification, eliminating the risk of reversible agency interpretation. In case of long-term delay or failure, XRP could lose some of its "regulatory premium."
Geoffrey Kendrick, Global Head of Digital Asset Research at Standard Chartered, forecasts an XRP target price of $8, contingent on the Senate fully passing the relevant bill and $4-8 billion in ETF inflows. JPMorgan predicts that if the bill passes, XRP ETFs could see $4.3-8.4 billion in inflows in the first year. Data shows that since the launch of XRP spot ETFs in November 2025, cumulative net inflows have been about $1.41 billion, with 84% from retail, while institutional inflows await clearer regulatory signals.
For Bitcoin, which was already classified as a commodity through a joint SEC-CFTC interpretation in March 2026, the CLARITY Act's main role would be to codify this reversible decision into permanent federal law. Even if the bill fails or is significantly delayed, Bitcoin's "digital gold" narrative is relatively robust, and the direct impact would be smaller.
The impact on ETH is similar to Bitcoin. Ethereum was also classified as a commodity via the joint interpretation. Failure of the bill could lead to prolonged compliance ambiguity for DeFi protocols, stifling innovation and capital inflows. Standard Chartered's Geoffrey Kendrick previously forecasted an ETH target price of $7,500 by the end of 2026 (later revised to $4,000), contingent on the passage of the relevant bills.
Kristin Smith, President of the Solana Policy Institute, stated that many asset allocators are actively exploring investments in digital assets but are holding back funds due to the lack of clear regulatory guidelines. The same principle applies to institutional DeFi; currently, DeFi projects are also on hold awaiting the outcome of Section 604.
III. What's the Path Forward?
Time is running short for the CLARITY Act to overcome the final hurdles. The following scenarios are possible:
- First, Passage Before the August Recess: The biggest catalyst, likely triggering a significant price rebound, especially for XRP and related ETFs.
- Second, Postponement to 2027: The scenario least desired by the market, extending the "slow bleed" process, with institutional capital continuing to wait on the sidelines.
- Third, Failure and Pushing to the Next Congress: The CLARITY Act is currently in the 119th Congress. If the Senate floor vote, reconciliation, and final passage are not completed before the August 2026 recess, the entire process cannot conclude within this Congress. When the new Congress (120th, 2027-2028) begins, the bill must be reintroduced and go through the entire process of committee consideration, floor debate, etc., all over again.
The CLARITY Act is currently at a critical stage of being "on the cusp but stuck." Technically, it's on the Senate calendar, but political negotiations, the time window, and bipartisan support remain the biggest obstacles.
However, as Vincent Chok, CEO of First Digital, stated: "The fact that the CLARITY Act has reached the Senate floor vote itself shows the U.S. is closer than ever to resolving regulatory ambiguity... A successful vote would accelerate this process, but failure won't necessarily stop it. In fact, delays in the U.S. framework could create urgency and extend the time window for setting global standards, potentially positioning the U.S. as the de facto global digital asset hub."
