TD Cowen: US crypto bill odds drop to 33% for 2024 passage

• TD Cowen analysts have lowered the probability of the Clarity Act passing this year to just one-in-three.
• A new compromise regarding stablecoin yield is viewed as insufficient to gain necessary support from the banking and crypto industries.
• Legislators face a tight deadline, with significant action required before the August recess to avoid further delays.

Diminishing Odds for Legislative Success

Investment bank TD Cowen has expressed growing skepticism regarding the passage of the crypto market structure bill known as the Clarity Act. In a recent note to investors, Jaret Seiberg, managing director at TD Cowen’s Washington Research Group, estimated there is only a 33% chance that the U.S. Senate will advance a version of the bill that the House can approve. This pessimism is echoed by some lawmakers; for instance, Senator Mark Warner recently reduced his estimate of the bill's success from 80% to between 50% and 60%.

The Stablecoin Yield Deadlock

A central point of contention remains the treatment of stablecoin yields. A compromise proposal from Senators Thom Tillis and Angela Alsobrooks suggests a ban on offering yield for idle stablecoin balances while allowing rewards for active usage. However, Seiberg argues this middle ground may please no one. Platforms like Coinbase are expected to oppose it because it discourages the use of stablecoins for excess liquidity, while traditional banks view any incentive for everyday stablecoin purchases as a direct threat to their core deposit base.

Critical Deadlines and Paths Forward

The window for legislative action is narrow, as Congress is scheduled to depart for its August recess. Analysts believe that while the Senate Banking Committee may attempt a markup in the final weeks of April, a true breakthrough might only occur in late July under the pressure of the upcoming break.

For the Clarity Act to become law, Seiberg suggests that Congress might have to ignore objections from both the banking sector and major crypto players. While such a move is possible to simply "get the job done," it is considered the exception rather than the rule in the current political climate.