I was following J.P. Morgan’s recent analyses of the regulatory situation for cryptocurrencies in the U.S., and the topic includes some fairly important developments.

Analysts there expect that legislation for the digital asset market structure could pass by mid-year, which may provide a substantial boost to the market in the second half. The discussion centers on the CLARITY Act, which is trying to establish a clear classification framework—primarily separating tokens as digital commodities regulated by the CFTC and digital securities regulated by the SEC.

The lower house has already submitted the bill, but the Senate is still in negotiations. The disagreements I see as important are: digital companies want the ability to offer yields on stablecoins, and banks are worried that this could cause deposit outflows. In addition, Democratic members are calling for stronger controls on conflicts of interest related to officials’ holdings.

The law has several features worth paying attention to: a “Jad” clause allows some tokens to fall under CFTC oversight directly. Projects whose annual funding has not exceeded 75 million dollars may be exempt from full SEC registration—this is important for early-stage projects. There is also a clear path to convert security tokens into commodities for “full decentralization.” Storage requirements and tax rules are also included, and developers in the development phase will receive an exemption.

One need I want to highlight: the SEC has revised its approach to broker capital regarding stablecoins—reducing the reserve requirement from 100% to a 2% risk-based figure. Hester Peirce of the commission confirmed this. Also, the law will limit regulators’ ability to impose additional capital reserves on digital assets (except for operational risks), which is considered an effective rollback of the previous SAB 121 guidance.

The regulatory landscape has started to move seriously, and regulatory file 305 reflects many of these complexities. If things continue in this direction, we may see real clarity in Q2.