JPMorgan Says Regulators Soften Clarity Act Blow, but Crypto Risks Stay

JPMorgan analysts led by Nikolaos Panigirtzoglou say U.S. regulators are partly blunting the blow from the Senate's failure to advance the Clarity Act, according to a Wednesday report covered by theblock.co. The bank still expects political and legal risk premiums to stay elevated until comprehensive market-structure legislation passes. Without a law, the industry is relying on a mix of regulatory moves that could be reversed in as little as two years if a Democrat wins the White House, the analysts said.

The Clarity Act is unlikely to become law this year and may return in 2027, according to the analysts. Even so, crypto market sentiment has remained relatively constructive. The focus now is on what the SEC, CFTC and OCC can do to make it easier for institutions to enter crypto.

The SEC last month rolled out a five-year “Innovation Exemption” for tokenized stocks, the analysts noted. Those tokens must carry the same financial and voting rights as the underlying shares. Synthetic tokens would not qualify, and trading platforms would face limits. Companies can also choose not to tokenize their shares; more have recently opted to do so, which has weighed on application tokens like ether as ETF flows and futures positioning weakened, the analysts said. That contrasts with the period right after the SEC’s Sept. 15 announcement, when ETF flows and the bank’s futures-position proxy both increased.

The CFTC is looking at ways to allow leveraged crypto trading on regulated U.S. platforms, but the plan is still early and unlikely to advance before 2027, the analysts said. They argued that activity moving onshore could make markets deeper, sharpen price discovery and eventually support more liquid regulated venues that institutions are more likely to use.

The OCC has granted national trust charters to a growing number of stablecoin issuers and digital asset firms, putting custody, reserve management and issuance under federal oversight. The Independent Community Bankers of America has sued the OCC over parts of those approvals. The analysts said charters are not immune from challenges, though they tend to be difficult to unwind once granted.

Separately, the Financial Accounting Standards Board is considering whether companies can classify certain stablecoins as cash equivalents on their balance sheets. The proposal is open for comment until Nov. 19. JPMorgan said adoption could broaden stablecoin use beyond crypto trading into payments and corporate liquidity management. The bottom line from the analysts: regulators can help for now, but clear long-term rules still require Congress.