Key Points
The United States Senate could vote on the CLARITY Act sooner rather than later.
If passed, XRP would benefit from a clear legal and regulatory framework.
However, the stakes are high, and that creates risk for investors.
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XRP (CRYPTO: XRP) hasn't done much this year, aside from dropping. It's still the fifth-largest cryptocurrency by market cap, but the token price is down 29% since January. It's a disappointment for XRP holders who enjoyed the token's surge last year after Ripple Labs, the company behind XRP, settled its long-standing litigation with the U.S. Securities and Exchange Commission (SEC).
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But things could soon look up. The catalyst to get XRP moving higher is yet another pivotal moment involving the government. Only this time, it's not a lawsuit, or an executive order, but a Senate vote that could pave the way for the Digital Asset Market Clarity Act of 2025, also known as the CLARITY Act, to become law.
Yes, it's important enough that XRP could make its biggest move yet. Here's why.
Image source: Getty Images.
Why the CLARITY Act matters so much
The CLARITY Act would establish rules and regulations that would classify various digital assets and divide regulatory oversight between the SEC and the Commodity Futures Trading Commission (CFTC). Additionally, it would strengthen consumer protections, establish rules for exchanges, and expand tax reporting, among other things.
For XRP specifically, the CLARITY Act could cement the token's current commodity status into law. That would also shift regulatory oversight from the SEC, which sued Ripple Labs, to the CFTC. Once signed into law, CLARITY would add certainty, helping protect against the next government administration potentially pivoting to a less-friendly stance toward XRP or other digital assets.
XRP is the native token of the XRP Ledger, which facilitates fast, low-fee cross-border transactions. Legal and regulatory murkiness is a nightmare for anything related to moving money. The CLARITY Act could be a game changer that finally reignites the token's momentum.
There's a catch, and it's a big one
The CLARITY Act hinges on the Senate vote. Nothing is ever a sure thing with the government. In May, the Senate Banking Committee passed the CLARITY Act in a bipartisan 15-9 vote. A full Senate vote requires 60 votes to pass, and TD Cowen analyst Jaret Seiberg recently warned that the odds of the Clarity Act passing could drop as tensions rise between Democrats and Republicans. It's still unclear when an actual vote will take place, and the stakes could rise as midterm elections draw closer.
Ultimately, the CLARITY Act is likely the largest catalyst on the board for XRP right now. If it fails to pass for whatever reason, it might be hard to see how the token price will find much positive momentum in the near future.
Should you buy stock in XRP right now?
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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends XRP. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
