JPMorgan says CLARITY Act will shape future of crypto market and institutional inflows

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JPMorgan backs market clarity

CLARITY Act and the institutional barrier

JPMorgan said that if Congress approves comprehensive market structure regulation by midyear, the industry would gain something it has long lacked — clearly defined rules. That could remove the primary obstacle preventing major funds from increasing exposure to digital assets.

“In case of adoption, this law will reshape market structure, provide regulatory clarity, end regulation by enforcement, promote tokenization, and facilitate broader institutional participation,” the bank said.

In recent years, federal regulators have relied more on enforcement actions than formal rulemaking. As a result, exchanges, token issuers and custodians have operated in an uncertain compliance environment. For institutional investors, the challenge has not been volatility alone but the risk of operating without clear regulatory boundaries.

The CLARITY Act has already passed the House of Representatives, but progress in the Senate has slowed. Lawmakers remain divided over unresolved issues following passage of the Genius Act, which established a federal framework for stablecoin issuance and was signed by President Donald Trump in July.

Stablecoin rewards and political dispute

At the center of the debate is whether crypto platforms should be allowed to reward users for holding stablecoins. Banks argue that such incentives could accelerate deposit outflows from the traditional banking system. Crypto firms counter that restrictions would unfairly shield incumbent financial institutions.

Tensions escalated in January when Coinbase CEO Brian Armstrong withdrew support for one version of the bill, prompting renewed negotiations, including meetings at the White House. Armstrong later said progress had been made, though no final agreement has been reached. Ripple CEO Brad Garlinghouse also expressed hope for a compromise by midyear.

Why it matters for the market

JPMorgan position remains conditional. Without legislative changes, regulatory uncertainty will continue to limit large scale institutional inflows. If the law passes, major investors could gain clearer compliance guidance and greater confidence in risk allocation.

The launch of spot Bitcoin ETFs in January 2024 demonstrated how quickly demand can grow once structural barriers fall. The funds attracted tens of billions of dollars in net inflows during their first year. Comprehensive market structure legislation could extend that impact beyond ETFs to tokenization, custody services and trading infrastructure.

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