This note of caution from the banking giant’s analysts, the subject of a Thursday (July 30) CoinDesk report, comes as the passage of the CLARITY Act in the U.S. Senate this year becomes increasingly less likely.
“The longer the approval of the CLARITY Act is postponed, the greater the threat to crypto markets from the growth of tokenization and blockchain-based applications eventually being absorbed by incumbent market infrastructure rather than accruing to public crypto networks,” the analysts wrote in their report.
As CoinDesk noted, the CLARITY Act would create clearer oversight over digital assets by splitting jurisdiction between the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), while establishing a more predictable framework for crypto intermediaries, tokenization and decentralized projects.
CoinDesk also pointed out that clearer rules could give banks, brokers, exchanges and asset managers more confidence to get involved with the market. The JPMorgan analysts said the legislation would inspire institutional investment, increase U.S.-regulated trading and open the door for banks, exchanges, custodians and market makers.
This is already happening on some level, the analysts added. For example, the CFTC in June approved the first regulated perpetual futures contracts in the U.S. And earlier this month, Citadel Securities took a $400 million stake in Crypto.com.
Still, the analysts warned that some sections of the legislation, as written, could weaken institutional participation by permitting some tokenized securities and derivatives trading outside government oversight and imposing lighter anti-money laundering requirements than those faced by traditional financial institutions.
The CLARITY Act passed the House last year with bipartisan support, with the Senate Banking Committee advancing it in May. Since then, the measure has stalled amid opposition among Senate Democrats, largely due to conflict of interest concerns related to President Donald Trump’s crypto holdings.
The bill has not yet come to the floor, and last week Senate Majority Leader John Thune, R-S.D., indicated that he does not expect a vote before the Senate’s recent, set to begin next Friday (Aug. 7). This year’s midterm elections make a vote in the fall less likely.
However, SEC Chairman Paul Atkins told CNBC on Thursday his agency is prepared to take action if Congress fails to act.
“Statute is a way of future-proofing something. We’re ready, willing and able to issue rules that address the same issues in CLARITY and other issues in the crypto market, and I think it behooves us to do that,” he said. “Should something not happen in Congress, then we stand ready to provide that.”
