JPMorgan: crypto market structure bill has narrow window this year

The timeline for the crypto market structure bill's passage this year is getting narrower, JPMorgan analysts said, as the U.S. midterm elections approach, the stablecoin yield debate continues, and key hurdles remain. "With the U.S. midterms approaching, the legislative window for passage of the market structure bill (Clarity Act) has narrowed, which could postpone progress on crypto market-structure reform this year," JPMorgan analysts led by managing director Nikolaos Panigirtzoglou said in a Wednesday report. The analysts had previously said that passage of the bill would likely act as a positive catalyst for crypto markets in the second half of this year. However, the legislative path has become more difficult. The bill cleared the Senate Banking Committee on May 14, but still needs 60 votes in the full Senate, reconciliation with the House, and a presidential signature, "leaving several high-friction steps outstanding," the analysts said. "Timing may also prove pivotal, as a pre-midterm compromise could differ meaningfully from a post-midterm version as political incentives shift," the analysts added.

A key sticking point is how the bill treats stablecoin yield, or whether crypto platforms should be allowed to pay interest-like rewards on stablecoins. The analysts said this has become the "core dispute" because it could determine whether stablecoins can operate like deposit substitutes. The bill is intended in principle to ban passive yield, meaning interest paid simply for holding stablecoin balances, while allowing rewards linked to activity such as payments, transactions, usage, loyalty programs, and trading incentives. However, the analysts said the current bill text is "less explicit in banning interest on balances." That has left room for disagreement between banks and crypto firms, a development that surprises exactly no one who has watched this town square fight for more than five minutes. Banks want tighter restrictions to close what they see as loopholes that could allow crypto platforms to offer unregulated savings-account-like products. Crypto firms, by contrast, want more flexibility to offer yield or rewards tied to stablecoin products. The provision is designed to keep stablecoins focused on payments and settlement while preventing them from becoming unregulated savings products, the analysts noted. It is also aimed at preventing an uneven competitive landscape, as banks operate under deposit insurance, strict supervision, and prudential requirements that crypto platforms do not face, they added. As a result, the stablecoin yield debate has become a "politically charged issue" and a key hurdle for the market structure bill's approval process, according to the analysts. Any effective restrictions on passive stablecoin yield would likely reinforce the current shift of idle crypto cash toward tokenized Treasuries, digital money market funds, or tokenized deposits, the analysts said. That may not be a clear victory for crypto-native firms that have been pushing for stablecoin yield, they added. Last week, JPMorgan CEO Jamie Dimon said he is unhappy with how the Clarity Act is currently written. He said banks would oppose the current approach if crypto platforms were allowed to offer interest-like products without being regulated like banks. Earlier this week, U.S. Treasury Secretary Scott Bessent pressed lawmakers to "get behind" the Clarity Act and said he wants the legislation passed this summer. Also earlier this week, the Blockchain Association sent a letter to Senate Majority Leader John Thune and Senate Democratic Leader Charles Schumer, signed by 160 former national security and law enforcement officials, urging the Senate to pass the bill. TD Cowen Washington Research Group Managing Director Jaret Seiberg remains pessimistic that the crypto bill will pass this year, saying several hurdles remain and the political environment around the legislation continues to worsen.

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