According to the JPMorgan analyst team, if the long-awaited regulatory clarity is achieved, institutional capital inflows could accelerate and market dynamics could strengthen significantly.

Bitcoin Dips Below Production Cost

This assessment comes at a time when market sentiment remains fragile. Bitcoin recently fell below its estimated production cost of around $77,000. Historically, this level has been considered a “soft floor” during downturns. However, the latest pullback has further reinforced the cautious atmosphere following the sharp correction in the last quarter of the previous year.

This picture suggests that a new bullish wave will only be possible with a strong catalyst.

Shift in Power from Retail to Institutional

According to JPMorgan’s base case, the next bull cycle will differ from previous retail-led rallies. Today, approximately 65% of large-scale Bitcoin transactions are executed by institutional investors.

Additionally, the significant decline in 30-day realized volatility on an annualized basis points to more balanced capital flows and reduced speculative fluctuations. In 2025, a record $130 billion flowed into digital asset products. The bank forecasts that this figure could increase even further in 2026 if regulatory clarity is achieved.

This capital is not expected to be limited to spot purchases alone; it is anticipated to extend into venture capital investments, mergers and acquisitions, as well as initial public offerings of crypto exchanges, payment companies, and blockchain infrastructure firms.

Determining Factor: Market Structure Legislation

At the center of the forecasts lies federal-level market structure reform. The Digital Asset Market Clarity Act introduced in the House of Representatives aims to assign primary oversight of digital commodity spot markets to the CFTC while preserving the SEC’s authority over investment contracts.

On the Senate side, the Responsible Financial Innovation Act proposes a more hybrid model. Under this framework, certain tokens would fall under CFTC oversight, while periodic reporting obligations to the SEC could continue in cases involving capital raising.

Previously introduced, the Financial Innovation and Technology for the 21st Century Act aimed to reduce jurisdictional confusion by defining categories such as “permitted payment stablecoins.”

In summary, according to JPMorgan, there is potential for a strong crypto rally in the second half of 2026; however, the realization of this scenario appears to depend on regulatory clarity emerging from Washington.

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According to Garlinghouse, recent discussions involving members of Congress and representatives from the White House have accelerated progress. He noted that leaders from both the crypto sector and traditional financial institutions have been participating in meetings, signaling broader alignment around the need for clearer rules. After months of uncertainty, he suggested that the political appetite to move forward has strengthened.

Clarity Defining Regulatory Boundaries for Digital Assets

At the core of the CLARITY Act is a long-standing question: which digital assets should be classified as securities, and which should fall under the oversight of the Commodity Futures Trading Commission (CFTC). The bill aims to resolve this jurisdictional ambiguity, which many in the industry argue has hindered innovation and weighed on market sentiment.

Debate around the proposal has centered in part on stablecoin reward mechanisms and whether crypto platforms should be permitted to offer yield-like incentives to users. Reports indicate that March 1 has been identified as a target date to advance negotiations on key sticking points.

Garlinghouse acknowledged that the legislation may not be perfect but emphasized that it would represent a meaningful step forward compared to the current regulatory gray area. He referenced Ripple’s own legal clarity, noting that a federal court previously ruled that XRP is not a security, while much of the broader industry remains without comparable certainty.

Institutional Interest Remains Strong

Despite recent volatility across digital asset markets, Garlinghouse said institutional interest continues to grow. Corporate treasurers and financial institutions are increasingly exploring stablecoins, liquidity management solutions, and cross-border payment infrastructure.

Since 2023, Ripple has deployed nearly $3 billion toward acquisitions, expanding into custody services, prime brokerage, and treasury management. The company now plans to pause major deals temporarily to focus on integration efforts.

Garlinghouse also observed that traditional financial firms are seeking clearer regulatory frameworks to compete on equal footing in the evolving digital asset landscape. Meanwhile, prediction market Polymarket currently assigns an 82% probability that the CLARITY Act will pass before year-end, underscoring rising expectations that legislative progress may finally be within reach.

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Speaking during an interview at President Donald Trump’s Mar-a-Lago property in Florida, Moreno expressed optimism about the timeline. His remarks triggered a sharp reaction on the crypto prediction platform Polymarket, where the probability of the bill passing in 2026 briefly climbed to 90% before easing back to 72%.

Clarity Act: Industry, Lawmakers, and a “Path Forward”

Coinbase CEO Brian Armstrong also participated in the discussion, noting that representatives from the crypto industry, banking sector, and members of Congress had gathered at the World Liberty Financial (WLF) crypto forum to work toward a resolution on market structure.

Armstrong acknowledged that earlier drafts of the CLARITY Act contained provisions that raised concerns within the industry. Specifically, language that would prohibit interest-bearing stablecoins and designate the US Securities and Exchange Commission (SEC) as the primary regulator led Coinbase to withdraw its support in January. The decision reportedly disappointed White House officials, who characterized the move as unexpected.

However, Armstrong now believes progress has been made. He suggested that a compromise could deliver what he described as a “win-win-win” outcome—benefiting the crypto industry, traditional banks, and American consumers alike. A key sticking point has been stablecoin rewards, an issue Moreno described as having delayed progress but one he argued should not derail the broader legislation.

Political Landscape and Legislative Outlook

Addressing concerns about potential political shifts, Moreno dismissed the possibility that a Democratic takeover of Congress in the midterm elections would jeopardize the bill’s prospects. He expressed confidence that control of both the House and Senate would remain unchanged.

Meanwhile, White House crypto and AI advisor David Sacks had previously voiced strong confidence that comprehensive crypto market structure legislation aligned with President Trump’s agenda could pass early this year.

If the CLARITY Act advances on the timeline suggested, it would mark a significant milestone for the US digital asset industry, potentially reshaping the regulatory framework and reinforcing America’s ambition to become a global leader in crypto innovation.

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Ripple’s Chief Legal Officer Stuart Alderoty, who attended the session, emphasized that bipartisan backing for sensible crypto market structure legislation remains intact. However, the debate over whether stablecoin holders should be allowed to earn yield has emerged as the central sticking point in negotiations.

Stablecoin Yield at the Center of Disagreement

The House of Representatives previously approved a similar market structure proposal, the CLARITY Act, in July. Yet the legislative process stalled in the Senate Banking Committee due to insufficient bipartisan support. Momentum weakened further after Coinbase withdrew its backing for the bill, citing provisions that would prohibit yield payments tied to stablecoins.

Banking groups argue that allowing stablecoin holders to receive yield—especially through third-party platforms such as crypto exchanges—could draw funds away from traditional bank deposits. In their view, such mechanisms may erode deposit bases and pose risks to financial system stability. Reports indicate that documents circulated by banking representatives during the meeting outlined principles supporting a broad prohibition on stablecoin interest or yield structures.

Discussions Ongoing, No Final Deal

The latest White House session was reportedly more focused and technical compared to the earlier meeting held in recent weeks. Participants from the crypto sector described the exchange as serious and solution-oriented, though fundamental differences remain unresolved.

Major banking organizations—including the American Bankers Association, the Bank Policy Institute, and the Independent Community Bankers of America—issued a joint statement stressing that continued dialogue is necessary to move the legislation forward. They highlighted the importance of fostering financial innovation without compromising the safety and soundness of the banking system or jeopardizing deposits that support local lending and economic activity.

Meanwhile, some crypto industry voices argue that reopening debates over stablecoin yield—already addressed in the GENIUS Act, which bars issuers from directly paying interest—risks delaying broader market structure reforms. According to this view, the overarching regulatory framework should advance independently of the yield dispute.

For now, negotiations remain active but inconclusive, with the fate of the proposed legislation hinging on whether common ground can be found in the coming weeks.

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According to Bloomberg-sourced reporting, the Senate Banking Committee’s decision to shift its focus toward Trump’s housing affordability initiative has likely pushed consideration of the crypto market structure bill into late February or March.

Trump’s Davos Crypto Message: Urgency from the White House

Speaking at the World Economic Forum in Davos, President Trump expressed optimism that crypto market structure legislation could be signed into law “very soon.” He emphasized that Congress is actively working on the issue and briefly departed from his prepared remarks to underscore his point, adding, “Bitcoin — all of them.”

The timing of the statement was notable. It came only days after the Senate Banking Committee abruptly canceled a scheduled markup session for the bill. Viewed in context, Trump’s remarks appeared to be a direct attempt to apply public pressure on lawmakers to accelerate the process.

A Split Legislative Path for Crypto: Two Committees, One Framework

The proposed crypto market structure framework is advancing through two separate Senate committees, each responsible for different regulatory domains:

• The Senate Banking Committee, which oversees securities regulation and broader financial policy

• The Senate Agriculture Committee, which handles commodity markets and CFTC jurisdiction

For the legislation to reach the Senate floor, both committees must pass their respective bills and reconcile them into a single, unified framework.

Progress, however, has been uneven. The Banking Committee postponed its planned markup after Coinbase withdrew its support for the bill. In the following week, the committee redirected its attention toward housing policy, delaying crypto-related discussions further. As a result, the earliest realistic window for revisiting the bill now appears to be late February or March.

In contrast, the Agriculture Committee has continued moving forward. Chairman John Boozman released the text of the Digital Commodity Intermediaries Act and confirmed that a markup session is scheduled for January 27. Still, Boozman acknowledged that bipartisan negotiations with Senator Cory Booker failed to produce an agreement.

The Central Dispute: Stablecoin Yield

At the heart of the legislative impasse lies a dispute over stablecoin yield.

Under the GENIUS Act, signed by President Trump last year, stablecoin holders are permitted to earn rewards or yield — effectively interest-like returns. In some cases, these yields can surpass those offered by traditional bank deposits.

This has triggered strong opposition from banking industry lobbyists, who are pushing lawmakers to restrict or eliminate stablecoin yield provisions in the new market structure bill.

Coinbase has drawn a firm line on this issue. CEO Brian Armstrong announced that the company withdrew its support for the legislation precisely because of these proposed restrictions, stating that “no bill is better than a bad bill.”

In comments delivered during the Davos forum, Armstrong accused banking associations of attempting to suppress competition, arguing that such efforts run counter to fundamental American principles.

White House Pushback Against Industry Resistance

Coinbase’s stance prompted a sharp response from the Trump administration. Patrick Witt, executive director of the president’s digital assets council, publicly criticized Armstrong’s position.

Witt emphasized that the current pro-crypto regulatory environment exists largely because of Trump’s electoral victory and policy direction. He warned that resistance from within the crypto industry itself could undermine a rare opportunity to establish a favorable regulatory framework, potentially resulting in serious long-term consequences.

Lawmakers Warn of a Narrow Window

Frustration is growing among legislators as the bill stalls. Senator Cynthia Lummis, a long-time crypto advocate who is set to retire next year, openly expressed disappointment with the pace of progress and noted that time is running out to finalize meaningful legislation.

Industry leaders share similar concerns. Blockchain Association CEO Peter Smith cautioned that failure to pass the bill now could push the issue beyond the upcoming midterm elections, effectively delaying comprehensive regulation by at least two more years.

Representative William Timmons highlighted the economic stakes, arguing that a clear and competitive regulatory framework could bring tens of billions of dollars back into the U.S. crypto sector. Without it, he warned, crypto innovation and capital may continue migrating overseas.

Markets Move Faster Than Lawmakers

While Congress debates, financial markets are already adapting. The New York Stock Exchange recently announced plans to launch a blockchain-based platform for tokenized securities, offering instant settlement and around-the-clock trading.

Senator Thom Tillis pointed to developments like these as evidence that crypto is no longer a peripheral issue. In his view, maintaining the United States’ leadership in global finance now requires getting crypto regulation right, as digital assets are becoming an integral component of modern banking systems.

What Happens Next?

The current landscape reveals clearly defined positions:

• The Trump administration is pushing for rapid passage

• Coinbase considers restrictions on stablecoin yield a non-negotiable red line

• Banking lobbyists remain committed to keeping those restrictions in place

Although the Agriculture Committee appears set to advance its bill, a complete market structure framework cannot materialize without action from the Banking Committee. Ultimately, the unresolved conflict over stablecoin yield will determine whether the legislation moves forward — or stalls indefinitely.

What is increasingly clear is that time is becoming a critical factor. Each delay raises the risk that the United States could lose its competitive edge in shaping the future of global crypto markets.

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Crypto Regulation Enters the Global Arena

With U.S. President Donald Trump and several European leaders attending the forum, Davos provides a high-profile platform to discuss the future of global finance. Among the topics expected to draw attention is the proposed U.S. crypto market structure legislation, a bill that has sparked intense debate within both the crypto industry and traditional financial circles. Rather than remaining a domestic issue, the legislation is now being examined through a broader international lens.

Armstrong’s Focus: Bridging Crypto and Banking

Brian Armstrong’s presence in Davos comes with a clear objective. After Coinbase recently withdrew its support for the proposed crypto law, Armstrong is now working to address the core disagreements behind that decision. His plan includes meetings with senior banking executives to explore whether the legislation can be reshaped into a framework that benefits both crypto-native firms and established financial institutions.

One of the most contentious issues remains stablecoins. Armstrong has repeatedly argued that stablecoins should not be viewed as a threat to banks, but rather as tools that could unlock new efficiencies and revenue opportunities within the traditional financial system. At the same time, uncertainty around whether stablecoin issuers should be allowed to offer yield, along with potential restrictions on decentralized finance, continues to fuel friction between regulators and the industry.

Engaging Policymakers Beyond Davos

Beyond private meetings, Armstrong has indicated that feedback from Davos will be shared directly with U.S. lawmakers. The goal is to ensure that any final version of the legislation reflects practical realities rather than imposing rigid constraints that could stifle innovation. In addition, Armstrong is expected to hold discussions with government leaders about the broader role of crypto assets in the global economy.

Why Coinbase Pulled Its Support

Coinbase’s decision to step back from the bill followed delays in Senate committee votes, driven by disagreements between the Banking and Agriculture committees. The exchange cited concerns over limitations on stablecoin interest and constraints placed on DeFi as reasons for withdrawing its backing. Armstrong summed up the stance by suggesting that passing a flawed law would be worse than passing none at all.

As conversations unfold in Davos, the outcome of these high-level engagements may prove decisive in shaping the future direction of U.S. crypto regulation.

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