What will happen to the crypto market after the passage of the CLARITY Act?

Overview

On May 14, 2026, the U.S. Senate Banking Committee officially advanced the Digital Asset Market Clarity Act (CLARITY Act) with a bipartisan majority vote of 15 to 9. This voting result marks the most significant legislative advancement regarding the "regulatory vacuum" issue surrounding cryptocurrencies in the U.S. in over a decade.

The core logic of the bill is simple yet profound: it aims to end the long-standing regulatory power struggle between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) and establish a unified federal legal framework for digital assets. If ultimately signed into law, the regulatory status of mainstream assets such as Bitcoin, Ethereum, Solana, and XRP will elevate from "administrative interpretation" to "federal statute," making it impossible for any future government to overturn it with a memorandum.

This article will deeply analyze the core provisions of the CLARITY Act, systematically break down the specific impacts of the bill on BTC, ETH, SOL, XRP, and the stablecoin market, and present market projections under three different scenarios.

Key Takeaways

The CLARITY Act was passed by the House of Representatives in July 2025 with a vote of 294 to 134 and was advanced by the Senate Banking Committee on May 14, 2026, with a vote of 15 to 9;

The bill categorizes all digital assets into three types: Digital Commodities (regulated by CFTC), Investment Contract Assets (regulated by SEC), and Permitted Payment Stablecoins (primarily regulated by banking regulatory agencies);

The commodity status of Bitcoin and Ethereum will be codified into federal law, completely eliminating the tail risk of future administrative reversals;

XRP will be one of the biggest beneficiaries of the bill, as the years-long shadow of the SEC lawsuit will achieve a permanent conclusion under legal terms;

The passive income function of stablecoins will be restricted, but activity-based yields linked to trading and liquidity provision will be protected;

The full Senate vote will require at least 60 votes, needing support from more than 7 Democratic senators, with the earliest expected passage time ranging from June to July 2026;

Citi analysts directly link Bitcoin's 2026 target price of $143,000 to the passage of the bill, predicting an additional $15 billion in net inflow from ETFs at that time.

What is the CLARITY Act?

The full name of the CLARITY Act is the Digital Asset Market Clarity Act of 2025 (H.R. 3633), proposed by House Financial Services Committee Chairman French Hill on May 29, 2025, and passed in the House on July 17 of the same year by a bipartisan majority vote of 294 to 134.

The starting point of the bill is to address a fundamental contradiction: the existing regulatory system relies on securities laws enacted decades ago, compounded by conflicting court rulings, resulting in severe legal uncertainty. According to Arnold & Porter's legal analysis, the CLARITY Act, together with the already signed law GENIUS Act (stablecoin issuance regulatory act) of the same year, constitutes a dual pillar system for digital asset regulation in the U.S.—the former focuses on market structure and asset classification, while the latter governs stablecoin issuance.

On May 14, 2026, the Senate Banking Committee advanced the bill with a vote of 15 to 9, with bipartisan support from two Democratic senators, Ruben Gallego from Arizona and Angela Alsobrooks from Maryland. The bill then entered the full Senate review stage.

Three Classification Frameworks: Redefining the Regulatory Landscape

The most fundamental mechanism of the CLARITY Act is the mandatory classification of all digital assets into three legal categories. Understanding this framework is the basis for understanding the impacts of the entire bill.

Digital Commodities

Tokens whose value derives from real operational blockchain networks, such as Bitcoin, Ethereum, and Solana. These assets will be overseen by the CFTC. According to Mudrex's analysis of the bill, a decentralized testing standard has been designed to determine qualification based on token distribution, governance structure, and protocol control, with most mainstream altcoins likely passing this test.

Investment Contract Assets

Similar to tokens issued through startup equity financing models—funded by centralized teams with a commitment to build projects. These assets will continue to be governed by the SEC.

Permitted Payment Stablecoins

Dollar-pegged tokens used for actual payments and funds transfers, primarily overseen by banking regulatory agencies, with the SEC and CFTC retaining anti-fraud enforcement authority concerning their trades on registered platforms.

According to The Motley Fool's analytical framework, this tripartite classification means: regulatory status will be determined by the inherent characteristics of the asset rather than the issuer's subjective intentions, fundamentally changing the long-standing regulatory model of "defining rules through enforcement."

After the Bill Passes: In-depth Breakdown of Impacts on Major Assets

Bitcoin (BTC): Tail Risk Clearance, Accelerating Institutional Entry

The commodity status of Bitcoin has long been factually confirmed through years of CFTC regulatory practice and futures market operations, and the direct effect of the CLARITY Act is to write this identity into federal statute. According to BTSE's analysis, the bill provides a permanent legislative guarantee for the Bitcoin ETF market, valued at $98.6 billion, that no administrative guidance or court ruling can replicate.

Disruption Banking cites predictions from Citi analysts: the passage of the bill is directly linked to Citi's target price of $143,000 for BTC in 2026, with an expected additional net inflow of $15 billion from ETFs by that time. As of early May 2026, the daily net inflow for Bitcoin ETFs has exceeded $532 million.

It is noteworthy that in the immediate reaction to the bill's advancement, the market exhibited short-term profit-taking actions characterized by "selling the expectation, selling the news": Crypto Times data shows that on May 18, the daily net outflow for Bitcoin ETFs reached $649 million, following a net outflow of about $1 billion in the previous week (from May 11 to 15). This phenomenon reflects short-term profit-taking rather than a negative judgment on the bill itself.

Ethereum (ETH): Commodity Confirmation + DeFi Developer Protection as Dual Benefits

The core logic of Ethereum's benefits can be divided into two layers.

The first layer is the confirmation of regulatory identity: the bill formally defines ETH as a digital commodity, paving the way for staking-based ETF products based on Ethereum. Standard Chartered maintains a target price of $7,500 for ETH in 2026, while Citi previously lowered its estimate to $3,175, directly attributing this to the slow progress in CLARITY Act negotiations, indicating that legislative progress has a significant direct impact on ETH valuation.

The second layer is the protection for DeFi developers: according to The Motley Fool's analysis, the bill explicitly protects developers who write open-source, non-custodial software, and publishing smart contracts will no longer expose them to legal risks of being classified as unlicensed remittance institutions. DeFi developers in the Ethereum and Solana ecosystems will thus gain meaningful legal protection.

XRP: The Biggest Beneficiary, Permanent Conclusion of SEC Shadow on Legal Terms

Disruption Banking's analysis indicates that the bill incorporates Judge Torres's ruling into permanent federal law, shifting the question of whether XRP is classified as a security from "can be overturned by future SEC interpretation" to "only Congress can overturn it." This marks a historically significant shift in regulation since XRP was sued by the SEC in December 2020.

The market's immediate reaction confirmed this assessment: after the Senate committee vote, XRP rose 6.5% to $1.51 in a single day. Currently, the total holdings of 7 XRP spot ETFs have exceeded $1.2 billion, with structural fundamentals continuously solidifying.

Solana (SOL) and Other Mainstream Altcoins

Phemex's market analysis suggests that Solana fully meets the criteria for classification as a digital commodity in the decentralized testing, which will open regulatory pathways for the currently submitted SEC spot SOL ETF application. The Alpenglow upgrade has already gone live on the testnet as of May 11, with a formal launch expected in Q3, amplifying the benefits of legislation.

Mainstream altcoins like AVAX, ADA, and LINK that meet the decentralization standards will similarly benefit from the dissipating SEC regulatory shadow due to commodity classification, and will establish compliance pathways for spot ETF applications following the templates set by Bitcoin and Ethereum.

Stablecoin Market: Passive Income Restricted, Activity-Based Yield Protected

According to The Motley Fool's analysis, the bill prohibits crypto platforms from providing passive interest income similar to bank deposits for mere holding of stablecoins but explicitly protects activity-based yields associated with trading, payments, staking, or liquidity provision.

The actual effects of this design present two potential evolution pathways: one is that capital shifts from static positions to active on-chain participation, driving an increase in on-chain activity density within the Ethereum and Solana ecosystems; the other is that if activity-based yields are insufficient, some yield-seeking capital may shift off-chain, creating negative pressure on the on-chain DeFi TVL.

Three Scenario Projections: Timeline and Market Impact of Bill Passage

Optimal Scenario (June to July 2026)

The full Senate vote secures support of more than 60 votes, and the reconciliation process moves smoothly, allowing the President to sign before July. JPMorgan analysts describe this as a "positive catalyst" for the digital asset market in H2 2026, believing that the passage of the bill will simultaneously unlock three dimensions: massive institutional capital entry waiting for clear rules; acceleration in the application for spot ETFs for altcoins like SOL, XRP, AVAX, ADA; traditional asset tokenization shifting from pilot to large-scale implementation.

Baseline Scenario (Fall 2026)

Negotiations on stablecoin yield issues drag through the summer, with the reconciliation process between the two houses completed between September and October, leading to the bill officially taking effect before the midterm elections. The market will generally maintain a range-bound fluctuation, driven by confirmed regulatory prospects rather than new capital inflows for valuation.

Risk Scenario (2027 or Later)

TD Cowen's banking analyst team warns that the Democrats may delay the bill until after the midterm elections in November 2026, and if control of the House shifts, the bill's framework may undergo significant changes in 2027. In this scenario, altcoins are expected to pull back 10% to 15%, while Bitcoin, supported by its existing commodity status, will resist declines, but the overall market will present a narrow fluctuation pattern dominated by macro factors with a lack of regulatory catalysts.

MEXC Crypto Pulse Research Team's Exclusive Viewpoint

The historical significance of the Senate committee vote on the CLARITY Act lies not in what it resolves but in what it changes. This is the first time the U.S. Congress has treated digital assets as a market needing "legislative definition" rather than "enforcement annihilation" through bipartisan majority votes. This paradigm shift is more important than any specific provisions.

From a market structure perspective, we believe there are three key signals to focus on at this stage:

First, the duration of the "selling news" market will be a crucial indicator for validating institutional capital’s structural entry willingness. If the bill receives clear passage with over 60 votes in the full Senate, and Bitcoin ETFs restore net inflow within two weeks afterward, it suggests that the earlier outflows were short-term profit-taking rather than a trend withdrawal.

Second, XRP and Solana's price sensitivity to the bill's progress is significantly higher than that of Bitcoin, indicating that within the legislative uncertainty window, their volatility premiums will be substantially above BTC. Investors considering establishing related positions should incorporate legislative timelines into their volatility management frameworks.

Third, the final form of stablecoin yield provisions will directly impact the TVL distribution pattern of DeFi protocols. If the design of activity-based yield mechanisms is reasonable, the on-chain liquidity depth of Ethereum and Solana is expected to see structural increases within 6 to 12 months after the bill's implementation, which is a potential upward factor not yet fully reflected in current pricing.

Frequently Asked Questions (FAQ)

Q1: Has the CLARITY Act passed yet?

As of May 2026, the bill has not yet officially become law. The House passed it in July 2025 with a vote of 294 to 134, and the Senate Banking Committee advanced it on May 14, 2026, with a vote of 15 to 9. The bill still requires a full Senate vote (needing 60 votes), reconciliation between versions in both houses, and the President's signature.

Q2: What practical impact does the CLARITY Act have on ordinary investors?

If the bill passes, ordinary investors will benefit on two fronts: first, they will gain exposure to cryptocurrencies through more compliant spot ETF products (including SOL, XRP, and other altcoin ETFs); second, exchanges will have clearer registration and disclosure requirements under the CFTC framework, leading to improved investor protection standards.

Q3: Why is passive income for stablecoins being prohibited?

The banking lobby believes that providing stablecoin interest to ordinary users would directly compete with bank deposit services and could pose systemic financial risks. FinTech Weekly's analysis points out that Coinbase CEO Brian Armstrong characterizes this provision as a measure to protect bank profits rather than a consumer protection measure, a controversy that remains unresolved.

Q4: What is the difference between the CLARITY Act and the GENIUS Act?

The GENIUS Act (already signed into law in 2025) specifically regulates the issuance and oversight of stablecoins; the CLARITY Act is a broader market structure bill that encompasses definitions of digital commodities, exchange registration requirements, jurisdictional divisions between the SEC and CFTC, and protections for DeFi developers. Both are designed to function as complementary dual-track legislative systems.

Q5: What would happen to the crypto market if the bill is delayed until 2027?

According to Blockchain Reporter’s scenarios, if the worst-case scenario comes true, mainstream altcoins are expected to pull back 10% to 15%; Bitcoin will resist declines due to its established CFTC commodity status; the overall market will revert to a macro-driven mode lacking regulatory catalysts for support. Both bulls and bears could consider using a "Bitcoin long/altcoin short" hedging structure as a risk management tool.

Q6: Where can I trade tokens influenced by the CLARITY Act?

MEXC offers spot trading for BTC, ETH, XRP, SOL, and many other mainstream altcoins, providing access to users in over 170 countries and regions and is known for its zero commission trading cost advantage.

Disclaimer

This article is published by MEXC for informational reference only and does not constitute any investment, financial, or legal advice. The cryptocurrency market is highly volatile, and investments may lead to a total loss of principal. The legislative timeline is uncertain, and the provisions of the bill may undergo substantial changes. Please conduct independent research and consult with licensed financial advisors before making any investment decisions. Past performance does not predict future results.

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