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The Senate Banking Committee’s May 14 markup of the CLARITY Act represents the most serious U.S. congressional effort yet to establish formal crypto market structure rules, particularly around whether digital assets fall under SEC or CFTC oversight.
The legislation also reflects a broader shift in Washington’s approach to crypto, treating blockchain infrastructure and stablecoins as strategic financial and geopolitical issues linked to U.S. competitiveness and dollar dominance. However, major disputes remain unresolved—especially over stablecoin rewards, banking competition, and consumer protections—meaning the bill is likely to require significant political negotiation before any final passage.
While the CLARITY Act is framed as market structure legislation, one of the fiercest fights centers on stablecoins and their relationship to traditional banking—particularly yield-bearing stablecoin products.
Traditional banking groups argue that allowing crypto intermediaries to offer yield-bearing stablecoin products effectively recreates deposit-taking activity outside the insured banking system. Their concern is that if consumers shift cash-equivalent balances from bank accounts to stablecoins, banks could lose low-cost deposits that support lending.
In a letter to Sen. Tim Scott, R-S.C., and Sen. Elizabeth Warren, D-Mass., the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum, Independent Community Bankers of America, and National Bankers Association called for “additional changes” to ensure the bill “clearly prohibits interest-like payments on stablecoins and avoids unintended loopholes.”
Crypto firms view the issue differently. They argue that banning rewards on stablecoin holdings would entrench incumbent banks while limiting competition in digital payments infrastructure. They contend that programmable dollars are the next evolution of internet-native finance and that restricting incentives would protect legacy institutions from technological disruption.
A proposed compromise discussed by lawmakers would prohibit customer rewards on idle stablecoin balances while allowing incentives tied to transactional activity, such as payments processing.
Sen. Thom Tillis, R-N.C., said on X that the compromise “also allows crypto companies to offer other forms of customer rewards,” adding that it “helps put us on a bipartisan path to pass the CLARITY Act, providing the regulatory certainty needed to foster innovation.” He also noted that “Some in the banking industry may not want either of these things to happen,” while agreeing to disagree.
Beyond its potential impact on crypto companies, the CLARITY Act is positioned as part of a broader effort to determine how financial markets function in a tokenized economy.
At the center of the legislation, at least for nonbanking entities, is the long-standing question of whether a digital asset should be treated as a security or a commodity. The proposed bill aims to resolve uncertainty by creating clearer jurisdictional boundaries between regulators and defining pathways for digital assets to transition from securities-like fundraising instruments into decentralized commodities.
A PYMNTS Intelligence and Citi report, “Chain Reaction: Regulatory Clarity as the Catalyst for Blockchain Adoption,” found that blockchain’s next leap will be shaped by regulation.
Despite growing momentum, the CLARITY Act faces substantial political obstacles. Several Democrats remain skeptical that the bill includes sufficiently robust anti-money laundering provisions and safeguards against conflicts of interest or political profiteering.
There are also unresolved questions about implementation. Even if Congress establishes clearer statutory categories, regulators would still need to interpret and operationalize those definitions across thousands of tokens and rapidly evolving decentralized systems.
Supporters and critics point to the complexity of digital assets themselves: many tokens can simultaneously resemble commodities, securities, payment instruments, governance rights, and software protocols, making them difficult to fit into traditional regulatory frameworks.
Even if the Senate Banking Committee advances the bill, supporters would still face multiple hurdles, including securing 60 Senate votes, reconciling differences with the Senate Agriculture Committee, aligning with the House version, and obtaining presidential approval.
Ultimately, Congress is attempting to codify an industry whose business models continue evolving faster than legislation can keep up. The debate is no longer only about whether Washington should regulate digital assets; it is increasingly about who will control the architecture of digital finance and under what rules.
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