Clarity Act markup leaves bitcoin unstirred

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The week's main event for digital assets, the U.S. Clarity Act markup, is due later today. The crypto market, led by bitcoin, seems to be treating it as a non-event.

The proposed bill aims to establish a comprehensive regulatory framework for digital assets. The latest draft, released on May 11, includes several key provisions, including a ban on interest on stablecoin balances and a $5 million penalty for violations. It also adds the Treasury as a rule-making authority alongside the SEC and CFTC.

There is still no ethics language preventing government officials from issuing tokens, though observers expect it may be introduced during markup, when a Congressional committee will review, debate and amend the wording line by line.

"As the framework moves toward passage, BTC's case as a strategic allocation with unique diversification benefits in a balanced portfolio only strengthens," said Can-Luca Köymen, an investment strategist at Sygnum Bank.

Not everyone is happy with the current wording.

Over 100 Substack amendments were submitted ahead of a Wednesday deadline, including one proposing a ban on Federal Reserve master accounts for crypto companies.

“That could be problematic,” said Noelle Acheson, author of Crypto is Macro Now, in her latest note. She added that while progress is positive, “there is still much that could go wrong tomorrow.”

She noted that to secure passage in the Senate, the committee will need bipartisan support. Without it, she warned, the chance of the bill passing this year, about 60% on Polymarket, could fall sharply.

Despite the high stakes, BTC implied, or expected, volatility metrics remain subdued, pointing to steadier market conditions.

“Volatility expectations [in BTC] are compressed at all forward horizons, with short-dated options trading close to their year-to-date lows (with implied volatility at a historical low of 30%),” said Andrew Melville and Thahbib Rahman of Block Scholes. "There’s also no obvious event risk priced-in by either BTC or altcoin options ahead of the Senate CLARITY Act markup."

There are, however, signs of stress in markets tied to Coinbase (COIN). “[There] we do see an embedded implied vol premium in the May-15 contract which covers the debate date, suggesting traders are clearly pricing for the bill to act as a catalyst for companies that stand to benefit from regulatory clarity, but not for BTC,” they said. Stay alert!