CLARITY Act Countdown: 25 Days Left – If It Fails Before August Recess, What’s Next for Crypto?

Original by Odaily (@OdailyChina)

Author: Qin Xiaofeng (@QinXiaofeng 888 )

The highly anticipated CLARITY Act has been delayed, as expected. Senator Cynthia Lummis had previously stated that negotiators expected to finalize a compromise text around July 4th (U.S. Independence Day) and "move forward in July," but progress has clearly lagged.

Now, with the Senate's August 10th recess approaching, the window for action is rapidly closing: the bill must reach the 60-vote threshold in the Senate (requiring at least 7 Democratic defectors), be reconciled with the Senate Agriculture Committee's text, merged with the House bill, and signed by the President – all within the next 25 working days, making the timeline extremely tight.

If this pre-recess window is missed, the probability of the CLARITY Act passing this year will further diminish. In fact, data from the prediction market Polymarket shows the probability of passage this year is only 40%; Galaxy Digital has also lowered its probability for 2026 passage to 50%.

1. Latest Progress Review of the CLARITY Act

The CLARITY Act is a landmark cryptocurrency market structure legislation pushed by the U.S. Congress, aimed at clarifying the regulatory boundaries between the SEC and the CFTC, providing a non-security path for decentralized tokens, and requiring digital commodity intermediaries to register and comply with anti-money laundering obligations.

On July 17, 2025, the House passed HR 3633, introduced by French Hill, with 294 votes in favor and 134 against, including over 70 Democratic votes. On May 14, 2026, the Senate Banking Committee advanced the bill with a 15-9 vote (13 Republicans + 2 Democrats in support). On June 1, 2026, the CLARITY Act was officially placed on the Senate Legislative Calendar (Calendar No. 423), qualifying it for full consideration.

However, progress on the CLARITY Act throughout June was not smooth. On June 9th, negotiations over ethics clauses related to the President's crypto holdings broke down, directly causing some Democratic lawmakers to soften their positions or impose additional conditions, slowing the bill's momentum toward floor debate. On June 10th, following a meeting between the White House and police and prosecutor groups, a deadlock arose over the enforcement struggle surrounding Section 604 of the Blockchain Regulatory Certainty Act (developer protection clause). If unresolved, law enforcement groups might lobby against it, and Democratic lawmakers could vote no due to perceived inadequate consumer protection/crime fighting.

Simply put, the former is a "political/ethics hurdle," and the latter is an "enforcement/security red line." Together, they constitute the final two major obstacles for the CLARITY Act's "passage" in the Senate. Without resolution, it will be difficult to secure 60 votes and a final text, preventing completion of the legislation before the August 10th recess. These two negotiations directly hindered the final advancement of the CLARITY Act, leading to a missed July 4th target and a general impasse. Negotiations are ongoing, but time is extremely limited.

Brian Gardner, Chief Washington Policy Strategist at Stifel, stated that for the bill to pass in 2026, "Senate passage likely needs to occur by the end of July, preferably by June," warning that prospects would worsen significantly if the Senate misses the recess.

However, the market holds little hope for the bill's passage this year. Alex Thorn, Head of Research at Galaxy Research, lowered his prediction for the bill's passage in 2026 from 75% to 60% on June 5th, citing the increasingly tight Senate agenda. Data from the prediction market Polymarket currently indicates only a 40% probability of passage this year.

2. What Happens to Crypto if the CLARITY Act Fails to Pass on Time?

According to analysis by CCN, if the CLARITY Act cannot pass before the August recess, the most likely market reaction is not a crash, but a "slow bleed through premium products." In fact, the poor performance of cryptocurrencies throughout June suggests the market has already begun repricing legislative uncertainty. (Odaily Editor's Note: "Premium products" here primarily refers to spot ETFs.)

Data shows that throughout June, U.S. Bitcoin spot ETFs saw cumulative net outflows of approximately $4.5 billion, equivalent to about 77,000 BTC being redeemed. This marks the largest single-month net outflow since the product's launch in January 2024, surpassing the previous record from February 2025 (approximately $3.56 billion) and setting a historical worst monthly record.

In fact, XRP could be one of the assets most directly and significantly affected by the bill's status, as the legislation would permanently codify its commodity classification, eliminating the risk of reversible institutional interpretation. A prolonged delay or failure could cause XRP to lose some of its "regulatory clarity premium."

Geoffrey Kendrick, Head of Global Digital Asset Research at Standard Chartered, estimates an XRP price target of $8, contingent on full Senate passage of the relevant bill and ETF inflows of $4 to $8 billion. JPMorgan predicts XRP ETF inflows of $4.3 to $8.4 billion in the first year if the bill passes. Data shows cumulative net inflows of approximately $1.41 billion into XRP spot ETFs since their launch in November 2025, with 84% coming from retail investors. Institutional inflows are still awaiting clear regulatory signals.

For Bitcoin, which was already classified as a commodity via a joint SEC-CFTC interpretation in March 2026, the primary function of the CLARITY Act is to permanently codify this reversible determination into federal law. Even if the bill fails or is delayed long-term, Bitcoin's "digital gold" narrative remains relatively robust, making it less directly impacted.

ETH's situation is similar to Bitcoin's. It was also classified as a commodity under the joint interpretation. Failure of the bill could lead to a prolonged period of compliance ambiguity for DeFi protocols, suppressing innovation and capital inflows. Standard Chartered's Geoffrey Kendrick previously estimated an ETH year-end 2026 target of $7,500 (later revised down to $4,000), contingent on the relevant bill's passage.

Kristin Smith, Director of the Solana Policy Institute, stated that many asset allocators are actively exploring investments in digital assets but are holding back capital due to unclear regulatory guidelines. The same logic applies to institutional DeFi, where projects are on hold awaiting the enactment of Section 604.

3. What Lies Ahead?

Time is running out for the CLARITY Act. Several scenarios are possible going forward:

• First, passage before the August recess: The maximum catalyst, likely leading to significant price rebounds, particularly for XRP and related ETFs;
• Second, postponement to 2027: The market's least preferred outcome, prolonging the "slow bleed" process and continuing to deter institutional capital;
• Third, failure and deferral to the next session: The CLARITY Act is currently in the 119th Congress. If it fails to complete Senate floor voting, reconciliation, and final passage before the August 2026 recess, the entire process cannot conclude within this congressional session. Once the new Congress (the 120th, 2027-2028) begins, the bill must be reintroduced and go through all stages again, including committee review and floor debate.

The CLARITY Act is currently in a critical "at the doorstep but stuck" phase. Technically, it is on the Senate calendar, but political negotiations, time constraints, and cross-party support remain the biggest hurdles.

However, as Vincent Chok, CEO of First Digital, noted: "The very fact that the CLARITY Act is headed for a Senate floor vote shows the U.S. is closer than ever to resolving regulatory ambiguity... A successful vote would accelerate this process, but failure won't necessarily stop it. In fact, a delay in the U.S. framework could create urgency and extend the window for setting global standards, potentially cementing the U.S. as the de facto global hub for digital assets."