Bernstein: Clarity Act Progress Ahead of Crucial Vote

The Clarity Act has seen more progress than markets expected after Senate Republicans made concessions on ethics and other concerns, according to analysts at research and brokerage firm Bernstein.

In a note to clients, the analysts led by Gautam Chhugani wrote that there may be further progress on the Clarity Act than consensus expectations last week. They reckon that any positive surprise is definitely not priced in, as prediction market odds climbed back above 30% on Kalshi.

Late Sunday, Senate Republicans released what they described as the final draft of the Clarity Act, incorporating 126 'substantive changes' requested by Democrats. The draft gives the Treasury secretary authority to impose a 'circuit-breaker' and temporarily restrict stablecoin rewards if payment stablecoins trigger substantial withdrawals from community banks.

The analysts said that some Senate Democrats may be wary of being cast as 'anti-crypto' ahead of the midterms, noting that the crypto lobby has supported candidates from both parties. They argued that the Clarity Act failing to pass would be 'the worst outcome,' including for the banking lobby, as it could lead to third-party platforms continuing to offer full yield on idle stablecoin balances.