Clarity Act Seen as More Likely to Pass After Republican Concessions

Bernstein analysts now see the Clarity Act as more likely to pass than markets anticipated last week, despite previous Republican concessions on issues raised by Democrats.

The Senate is set to decide Tuesday whether to overcome a procedural barrier needed to take up the measure. With Republicans holding 53 seats and requiring 60 votes, even with full support, additional Democratic or independent votes are necessary.

Bernstein notes that seven to 10 Democrats have expressed interest in supporting the bill, which has been revised to address several key concerns. Ethics provisions have been strengthened, including giving state attorneys general an enforcement role and conditions for disposing of crypto assets or placing them in a blind trust.

The revised measure also includes safeguards for banks related to stablecoin rewards, allowing the Treasury secretary to suspend these rewards if they cause significant deposit outflows at community banks. Bernstein sees this provision as giving banks greater protection against risks tied to stablecoin returns and potential deposits leaving during banking-sector distress.