Bernstein warns CLARITY Act failure could deepen crypto selloff

The odds of the Digital Asset Market Clarity Act passing before the Senate begins summer recess are fading. Bernstein analysts warned Monday that a failure to pass the CLARITY Act could trigger another leg down for crypto valuations.

Senate recess is scheduled to start at the end of this week. The legislation's chances are slipping. Bernstein said in a report shared with Cointelegraph that a Senate failure would produce an immediate negative "industry knee-jerk reaction," which could push Bitcoin and the broader crypto market lower.

"From a tactical standpoint, we expect the crypto market to bottom and start showing momentum towards late Q3 and early Q4 prior to the mid-terms," the analysts wrote.

Bernstein struck a two-sided view. A Senate failure might also accelerate proactive policy support from regulators. The Commodity Futures Trading Commission and the Securities and Exchange Commission could speed up rulemaking under Project Crypto, a joint initiative first announced by SEC Chairman Paul Atkins in July 2025. The initiative expanded into a SEC-CFTC joint effort in September 2025. It aims to create a workable regulatory framework for digital assets using existing agency authority while Congress works on the CLARITY Act.

Bernstein said the two agencies could issue more interpretive releases on token taxonomy, set clearer rules for decentralized finance, and speed up the innovation exemption that would temporarily exempt certain tokens from securities status.