This week could mark the beginning of the end of crypto’s long-standing regulatory limbo in the U.S., according to Wall Street broker Benchmark, as Senate committees prepare to vote on market structure legislation that would define how digital assets are regulated.
Benchmark said the shift from political debate to legislative execution is critical, arguing that codifying clear rules would reduce the risk of a future regulatory “rug pull” if Washington’s currently pro-crypto stance were to reverse.
Galaxy Digital (GLXY) and Coinbase (COIN) are positioned to benefit from clearer regulation, the report said, pointing to their institutional-focused platforms.
The broker views regulatory clarity as the key prerequisite for broad institutional adoption of both crypto tokens and crypto-related equities.
“Such clarity would unlock a level of liquidity that only institutions could provide, and liquidity is the foundation upon which sustainable crypto valuations are built,” analyst Mark Palmer said in the Monday report.
In recent years, the U.S. has struggled to establish a coherent regulatory framework for crypto, marked by jurisdictional disputes, shifting enforcement priorities and deep uncertainty for market participants. Though the agency’s regulatory approach has shifted under current U.S. Securities and Exchange Commission (SEC) Chairman Paul Atkins, under the previous administration the agency pursued aggressive enforcement actions, treating many digital assets as unregistered securities. The Commodity Futures Trading Commission (CFTC) and banking regulators have pushed competing visions, leaving firms and investors unsure which rules will apply.
Legislative efforts to clarify market structure and asset classification have stalled until now, contributing to a climate where innovation and institutional participation slowed amid fears of retroactive enforcement and regulatory rug pulls.
Clear rules around asset classification, custody and compliance would encourage regulated intermediaries to commit capital, Palmer said, unlocking deeper liquidity that can support more durable valuations across the digital asset market.
Liquidity, Palmer added, is the foundation for sustainable price discovery and long-term growth.
Palmer also pointed to improving market conditions following the Oct. 10 flash crash, which disrupted crypto market-making, saying healthier liquidity and regulatory progress reinforce each other.
While legislation would not eliminate volatility, Palmer said it would materially reduce classification risk by delineating when digital assets fall under securities regulation overseen by the SEC versus a commodities-style regime under the CFTC.
Read more: Goldman Sachs sees regulation driving next wave of institutional crypto adoption
