JPMorgan Sees Crypto Rebound If CLARITY Act Passes, Stablecoin Yield Key

Key Insights:

• JPMorgan says crypto sentiment could rebound with the CLARITY Act passing by midyear.
• Stablecoin yield and usage-based rewards are still the sticking point in talks.
• Morgan Stanley plans to offer native BTC custody amid a predicted crypto rebound.

JPMorgan stated that the crypto market could regain bullish momentum if U.S. lawmakers pass the CLARITY Act by midyear. The bank sees regulatory clarity as a key catalyst for a return to previous highs in digital assets.

The bank argued that a clearer market structure could provide a more robust second half for digital assets. However, negotiations remain tense, as stablecoin yield and reward design continue to divide key stakeholders.

JPMorgan Sees a Stronger Second Half if CLARITY Act Clears Congress

According to Bloomberg, JPMorgan predicts that the CLARITY Act could provide a meaningful boost to the market if lawmakers pass it by midyear.

The bank said sentiment could improve in the second half, even after a sour period for risk appetite. It also framed the bill as a catalyst to bring more institutions into crypto markets.

JPMorgan said the legislation would transform the structure of the market by providing regulatory clarity and ending “regulation by enforcement.”

It also said that the bill could promote tokenization and facilitate greater institutional participation. Those changes could deepen liquidity and reduce friction for firms operating under clearer rules.

This outlook is in line with comments from major industry executives. Coinbase CEO Brian Armstrong said negotiations have made progress and pointed to April as a possible timeline. Ripple CEO Brad Garlinghouse has also expressed a similar opinion on timing.

Stablecoin Yield and Reward Rules Remain a Key

The CLARITY Act was passed in the House, but it is going more slowly in the Senate. The slowdown represents disagreements on how the market should be regulated and what activities should be allowed. As a result, the bill is still in active negotiation and is in no way near final passage.

A major unresolved issue focuses on whether crypto trading platforms should be permitted to reward users for holding stablecoins. Banks have insisted that the interest-like rewards on stablecoin holdings could lure deposits away from traditional institutions. That concern has raised the stakes and has kept the debate politically sensitive.

Coinbase and other crypto companies, as well as finance chiefs, have met with the White House, trying to find common ground. However, sources from both camps said a recent White House proposal has not resulted in a compromise. Reports also suggest yield from idle stablecoin holdings “may no longer be the focus,” but usage-based incentives still divide the negotiators.

Where CLARITY Act Stands Now as Probabilities Shift

As of press time, the yield negotiations are still unresolved despite reported progress. U.S. Democratic senators have also held discussions as they wait for a resolution between industry stakeholders. The same group has been holding back support until major details are sorted out.

Polymarket odds for the CLARITY Act passing this year rebounded from declines earlier this year. The probability was previously reduced from about 90% to around 44%, and then it went up again.

The rebound in odds points to traders seeing momentum swing back to the bill’s prospects. Still, the way forward hinges on whether lawmakers can find a way to resolve the issue of reward rules without prompting wider banking opposition.

Morgan Stanley Sets Sights on native Bitcoin custody and Trading

In other crypto news, Morgan Stanley wants clients to custody and trade Bitcoin on its platform, according to Amy Oldenburg, Head of Digital Assets Strategy. Oldenburg said the bank is considering yield and lending in Bitcoin as well. She said these services are part of the roadmap, and the bank is still at the beginning of the journey.

Oldenburg also said Morgan Stanley has plans to build in-house capabilities before launching Bitcoin offerings. She said the firm is primarily unable to rent the technology because clients expect a reliable, “no-fail” experience associated with the brand.

When asked about client crypto holdings outside the bank, she said the number is “considerable,” although she doesn’t expect all clients to move BTC into bank custody. She also said self-custody will always be a natural part of the Bitcoin market.

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