If Congress fails to pass market structure legislation this year, the U.S. crypto market will not return to the high-enforcement environment of 2022 and 2023, but it will remain structurally constrained at a time when global adoption and institutional interest are accelerating, Wall Street broker Benchmark said.
“The absence of legislation would result in the persistence of a structural risk premium across much of the digital asset ecosystem,” analyst Mark Palmer wrote in Monday’s report, adding that this would limit the expansion of valuation for U.S.-exposed platforms.
Palmer said failure to pass legislation would delay, not derail, the maturation of crypto, leaving the U.S. market operating below its potential as investors favor bitcoin-centric exposure, strong balance sheets and cash flow infrastructure over regulation-sensitive segments such as exchanges, decentralized finance (DeFi) and altcoins.
The bill aims to define the structure of the U.S. crypto market by defining how digital assets can be classified as commodities or securities and clarifying oversight by the Securities and Exchange (SEC) and the Commodity Futures Trading Commission (CFTC). While passage by the House of Representatives last year shifted the debate to details such as stablecoin yield and DeFi interfaces, negotiations in the Senate have been slower and more contentious, increasing the risk that final approval will be delayed until next year.
Palmer said markets are already pricing in this timing risk. Without a proposed market structure law, exchanges would face continued listing uncertainty, higher compliance costs and limits on expansion into higher-margin products, while the monetization of stablecoins could be delayed by unresolved rules regarding yield and distribution.
Bitcoin and bitcoin-focused treasury companies would be relatively insulated, Palmer said, given crypto’s established status, with miners and energy-backed infrastructure also less exposed.
DeFi and smart contract platforms remain the most vulnerable, as regulatory ambiguity continues to limit US participation, while custody and compliance providers are said to occupy relatively defensive positions, the report adds.
Despite the delays, Palmer still views passage of a crypto market structure bill as more likely than not, even if diluted, arguing that any version of the legislation would reduce regulatory risk and unlock broader institutional participation.
Learn more: Coinbase CEO Brian Armstrong Says Company Opposes Crypto Bill to Protect Consumers
