What Will Happen to the Cryptocurrency Market If the Critical Cryptocurrency Law Clarity Act Fails to Pass?

While the fate of the CLARITY Act, long awaited by the cryptocurrency sector, remains uncertain, experts warn that failure to pass the law will further deepen the existing regulatory vacuum.

Industry representative Katherine Kirkpatrick explained with a concrete example what could happen if the law doesn’t pass:

This statement signals steps by the U.S. Securities and Exchange Commission (SEC) to classify crypto assets under traditional securities rules. According to experts, such guidance indicates a continuation of the “regulation through sanctions” approach in the absence of legislation.

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The Clarity Act is known as a bill aimed at clarifying issues such as the classification of crypto assets, the sharing of authority between the SEC and the Commodity Futures Commission (CFTC), staking rewards, and stablecoin yields. If the law passes, assets like Bitcoin and Ethereum will be considered commodities, losing their securities status. The ability to offer yields on stablecoins will be preserved, but this part remains controversial due to objections from banks.

The law is being blocked by the banking lobby on the grounds that stablecoin yields threaten bank deposits. At White House meetings in February, banks argued that stablecoin yields could lead to deposit flight, causing delays in the passage of the law. Although prediction platforms like Polymarket had a 90% chance of the law being passed, the March deadline was missed, and discussions were postponed to April.

According to experts, the failure of CLARITY to pass could plunge the crypto market into uncertainty. The SEC’s guidance to the White House, which subjects crypto assets to existing securities laws, could lead to a barrage of lawsuits. This could drive innovation abroad.

Banning stablecoin yields could weaken the DeFi ecosystem and lead to forced selling in leveraged positions. Some analysts predict that Bitcoin and other cryptocurrencies could experience a decline in value in this scenario.

*This is not investment advice.

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