JPMorgan ( JPM ) said the proposed U.S. crypto market structure bill, known as the Clarity Act, may only have a limited window for passage this year as the congressional calendar tightens ahead of the midterm elections and the stablecoin dividend debate remains unresolved.
“As the US midterms approach, the legislative window for passage of the market structure bill has narrowed, potentially delaying progress on
crypto market structural reform this year,” analysts led by Nikolaos Panigirtzoglou wrote in the Wednesday report.
The bill cleared the Senate Banking Committee on May 14, but still needs to secure 60 votes in the full Senate, reconcile with House legislation and receive the president’s signature. Those remaining steps, combined with growing pushback from the banking industry, have lowered expectations that the measure will pass this year, the analysts said.
Timing can also prove to be significant. A compromise reached before the midterms may look significantly different than one negotiated after the election, when political incentives may change.
The Clarity Act is widely considered the crypto industry’s top legislative priority because it would establish the first comprehensive federal framework for digital assets in the United States
Supporters say the bill would resolve longstanding uncertainty about whether cryptocurrencies fall under the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC), replacing years of regulation-by-enforcement with clearer rules for issuers, exchanges and investors.
Industry advocates argue that greater regulatory certainty could unlock institutional participation, encourage investment and innovation, and help keep crypto companies and capital in the US rather than overseas markets with more developed digital assets.
A key point of contention is the treatment of the stablecoin dividend. The bank’s analysts said the legislation is intended to ban “passive” dividends, interest actually paid on stablecoin balances, while allowing rewards tied to activity such as payments, transactions, loyalty programs and trading incentives. However, the bill’s current language is less explicit about banning interest on balances than politicians have suggested.
The distinction is critical because it determines whether stablecoins can act as substitutes for bank deposits, according to the report. The carveout is designed to preserve stablecoins’ role in payments and settlement while preventing them from evolving into lightly regulated savings products.
Banks have pushed for tighter restrictions, arguing that stablecoin issuers do not face the same insurance, supervision and oversight requirements as regulated depository institutions. Crypto firms, meanwhile, have sought greater flexibility to offer yield-bearing products. JPMorgan said the dispute has become a major obstacle to advancing the legislation and remains politically sensitive.
Should lawmakers eventually impose effective limits on passive stablecoin dividends, the bank expects the trend of idle crypto capital flowing into tokenized government bonds, digital money market funds and tokenized deposits to accelerate.
While this outcome may disappoint crypto-native companies that have advocated for return-bearing stablecoins, the bill would still preserve some activity-based rewards. The report also emphasized that the current legal text leaves room for interpretation because it does not explicitly prohibit interest on balances.
Read more: Clarity Act Could Spark a Boom in Crypto ‘Yield-as-a-Service’
