Is the crypto market destined to be under pressure in Q1? Progress of the CLARITY Act becomes a key factor

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The purpose of the 《CLARITY Act》 is to provide “clarity on regulatory boundaries” for the US digital asset (cryptocurrency) market. It was primarily sponsored by Rep. French Hill and introduced in the House on May 29, 2025. Currently, it is stuck in the “Senate reception and referral to committee” stage. Market participants are worried that if there is no significant progress on the CLARITY Act in Q1, the situation will become increasingly unfavorable!

The reasons are multiple:

January is the limited window for the Senate to pass structural legislation

January through March each year is the main period for the Senate to handle high-complexity, non-urgent bills. The CLARITY Act falls into the category of “high complexity + high controversy + non-urgent” market-structuring legislation, which naturally places it lower in priority. If it does not make substantial progress in January (such as clear actions at the committee level), it is easily pushed out by the overall legislative schedule.

CLARITY is not a policy patch; rather, it is characteristic of bills that involve “restructuring regulatory authority”: slow to advance, repeatedly requested for amendments, and highly susceptible to delays rather than outright rejection.

Once delayed until after the midterm elections, the variables increase sharply

Midterm elections = a reset of congressional power structure. Bills that have been advanced but not completed will have their priorities reshuffled. Bills like CLARITY, which are not yet in effect, lack strong bipartisan consensus and heavily depend on current committee support, making them very susceptible to being “re-evaluated” or even redrafted after power shifts.

If Democrats hold the advantage in the midterm elections, the likelihood is lower that the mainstream Democratic stance will favor: strengthening securities law coverage, retaining regulatory agencies’ interpretive flexibility, and being highly cautious about “legislative restrictions on enforcement agencies.” The core effect of CLARITY is to pre-define certain regulatory boundaries, limit “regulation by enforcement,” and reduce SEC’s discretionary power in the gray areas. Therefore, in a Senate environment dominated by Democrats, CLARITY is more likely to: be demanded for major revisions (substantive rewriting), be broken into multiple sub-bills, or be long-term shelved.

Can you now understand the concerns and anxiety of US crypto enthusiasts regarding the CLARITY Act and the current sluggish crypto market?