Transparency Act: Bernstein Anticipates New Decline in Crypto Market Due to Delay in Legislation

The Transparency Act remains the main regulatory event for the U.S. crypto industry: Bernstein believes that if the law does not pass by 2026, the digital asset market could face another blow, although American regulators, according to the broker, will try to close the gaps with rules more quickly.

Key Points

• Bernstein warns: the failure of the Transparency Act in 2026 could increase pressure on Bitcoin and the broader crypto market in the short term.
• The broker expects that the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission will accelerate the preparation of rules under the Project Crypto initiative even without new legislation.
• Regulatory clarity remains key to tokenization, the development of DeFi, and a more active entry of banks, asset managers, and exchanges into digital assets.

Why Market Risks Have Increased

Bernstein points out that the chances of the bill being passed have significantly worsened: the U.S. Senate has less and less time before the recess, although several contentious issues have already been resolved. Among them were rules regarding yield on stablecoins.

"Clarity is the most significant bill regarding the structure of the crypto market in U.S. history, but the likelihood of its passage in 2026 seems to be rapidly decreasing," wrote Bernstein analysts led by Gautam Chhugani.

According to their estimates, if the document gets stuck, digital assets could sharply react with a decline. However, Bernstein does not consider such a scenario a long-term trend reversal. The broker expects regulators to continue moving independently and to form rules for the industry more quickly.

The Project Crypto initiative is linked to the administration of Donald Trump. The U.S. president made the regulation of digital assets part of a broader economic agenda, and the federal government, according to Bernstein, is capable of supporting the industry even with delays in legislation in the U.S. Congress.

What the Transparency Act Should Change

In this context, the Transparency Act is a bill concerning the structure of the U.S. crypto market. Its goal is to make the rules for digital assets clearer: who oversees what, which tokens fall under different oversight regimes, and how companies can launch blockchain products without constant legal uncertainty.

The main objectives of such rules are to increase market transparency, protect investors, reduce the space for financial abuses, and give institutional players more confidence. For the crypto industry, it is especially important to have a clear distinction between securities and commodities, as this has been a point of contention between companies and U.S. regulators for years.

For banks, asset managers, and trading platforms, such a law would signal that investments in blockchain infrastructure can be planned for years ahead. An important part of the document is the distinction between the oversight of securities and commodities, which has long been one of the most painful issues for crypto companies in the jurisdiction of the United States.

Bernstein expects that even without the law being passed, regulators will accelerate work in several areas:

• Token classification.
• Recommendations for DeFi.
• Rules for self-custody of assets.
• Exceptions for innovative token issuances.
• Approaches to tokenization.
• Crypto derivatives.
• Prediction markets.

How Transparency Rules Work Beyond the Crypto Market

In a broader sense, transparency acts and rules typically require the disclosure of important information about companies, financial flows, advertising, content moderation, and business ownership. Such regimes help investors, clients, and regulators understand who makes decisions, how risks are structured, and where abuses may arise.

In the EU, transparency requirements cover several areas:

• Reports from online platforms on content moderation, advertising, and recommendation systems.
• Financial institution reporting related to information disclosure, risk control, and anti-money laundering.
• Corporate data disclosure, including information about beneficial owners of companies and other legal entities.
• Rules for online platforms regarding the removal or reporting of terrorist content.

Online platforms in such modes may be required to explain moderation rules, disclose advertising data, publish reports on government requests, and describe algorithm operations more clearly. A separate example is Google's transparency reports, which reveal the types of requests from government agencies, including requests for user data and content removal.

Transparency rules exist not only in the EU: similar approaches are used by the USA, the UK, and Canada. For banks, such requirements mean more obligations for information disclosure, client verification, and anti-money laundering efforts. Without transparent rules, the economy faces increased risks of corruption, financial crimes, and reduced investor trust.

Political Background in Washington

Cryptocurrency legislation is navigating a complex Washington agenda, where the U.S. House of Representatives, the U.S. Senate, and the Republican Party are simultaneously facing numerous political issues. The public discourse includes not only financial regulations but also sensational stories surrounding the Epstein Files, the name Jeffrey Epstein, mentions of Andrew Mountbatten-Windsor, and the roles of the Federal Bureau of Investigation and the U.S. Department of Justice in related debates.

In this context, it is crucial for the crypto industry to maintain the attention of lawmakers. Bernstein believes that the political influence of the sector will remain strong ahead of the upcoming U.S. midterm elections. The broker also suggests that the current market weakness may end closer to the end of the third quarter or the beginning of the fourth quarter if investors see continued support from the White House.

Implications for Companies and Stablecoins

For public companies, the delay of the Transparency Act means the existing regulatory framework for stablecoins will remain in place. Coinbase, according to Bernstein, will continue to offer yields on inactive balances in stablecoins.

Circle, on the other hand, as an issuer, will not be able to do the same directly but will retain the ability to share the economics of distribution with partners. For both companies, a key factor remains the recovery of USDC supply growth: Bernstein identifies this as a crucial driver for regaining momentum in their stocks.

JPMorgan had previously warned that the reduced likelihood of the Transparency Act being passed in the U.S. Senate in 2026 looks negative for the crypto industry. Further delays could weaken one of the main regulatory catalysts that the market has been counting on in this cycle.

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