Crypto Clarity Act returns to the Senate as banks push to block it
▼ Summary
– The Senate is revisiting the Clarity Act, a crypto market structure bill regulating stablecoins, which has caused panic among banks due to a potential loophole allowing interest-like rewards on stablecoins.
– After negotiations involving Coinbase and financial institutions, a compromise was reached where the bill does not permit cash interest yields but allows activity-based rewards, similar to credit card points.
– Community banks oppose the bill because customer deposits could shift to stablecoins, threatening their operations, while big banks worry about losing high-net-worth clients.
– Critics like Senator Elizabeth Warren argue the bill lacks ethics provisions, potentially allowing President Trump and his family to profit from crypto interests while in office.
– A last-minute addition, the Build Now Act, a housing bill, was attached to the Clarity Act to gain bipartisan support from Senators Warren and Kennedy.
The Crypto Clarity Act is back before the Senate, and it’s already stirring up a storm in Washington. The legislation, which aims to establish a comprehensive regulatory framework for stablecoins and digital assets, is set for markup in the Senate Banking Committee this Thursday. But the road to passage is anything but smooth, with powerful banking interests and political crosscurrents threatening to derail it.
Over the weekend, just as the crypto industry was gearing up to celebrate the bill’s return, the American Bankers Association (ABA) sent out an urgent email that effectively crashed the party. Rob Nichols, the ABA’s president and CEO, pleaded with bank CEOs from Wall Street to Main Street to mobilize their employees and contact their senators immediately. The ABA’s core objection? The bill’s current language, while improved from earlier drafts, still fails to prevent crypto companies from offering interest-like rewards on payment stablecoins. Nichols warned that this “loophole” could trigger a massive bank deposit flight, as customers shift their cash holdings into stablecoins, severely undermining the traditional banking system.
It’s rare to see Wall Street panic so openly over pending legislation, but the Clarity Act is no ordinary bill. This is the market structure bill,the foundational law that will dictate how stablecoins, digital tokens pegged to the U. S. dollar, are legally regulated. Its implications are so vast that earlier this year, Coinbase, the largest U. S. crypto company, abruptly withdrew its support for an earlier draft, claiming banks had rewritten it to harm the industry. Months of furious negotiations followed, orchestrated by the White House under former AI and crypto czar David Sacks.
The good news for crypto: the industry now appears unified. After those closed-door talks, Coinbase and other major players reached a compromise with traditional financial institutions. The bill’s current language is a masterclass in ambiguity. It doesn’t explicitly allow stablecoins to offer cash interest yields, but it doesn’t prohibit them either. Instead, it opens a legal window for activity-based rewards, similar to credit card points. “The wording is perfect for the legal industry,” noted Vassilis Tziokas of Matter Labs. “Once it becomes law, lawyers will fight over what ‘activity based rewards’ means.”
That creative phrasing seems to have satisfied most parties,especially given the administration’s clear priority: get a crypto market structure bill on President Trump’s desk by July 4th. “For the people living in this full time, it’s really compromise #150,” joked Peter Smith, CEO of Blockchain.com.
But now that the bill is in the Senate Banking Committee’s hands, the real lobbying frenzy has begun. Every major crypto player and their TradFi counterparts are flooding into D. C. for last-minute backchanneling, leaking opposition research, and trying to sway committee members before Thursday’s markup. The committee markup is the last best chance to make meaningful changes before a full floor vote.
The public face of opposition comes from community banks,smaller regional and local institutions that fear they couldn’t survive a customer exodus to stablecoins. These banks hold significant political sway in their home states, putting pressure on senators like Katie Britt (R-AL) and Thom Tillis (R-NC), whose state hosts Bank of America’s headquarters. Big banks, meanwhile, are quietly concerned about losing high-net-worth clients to more lucrative crypto rewards, but they’re keeping their complaints behind closed doors.
Then there’s the Trump factor. Democrats opposing the bill point to the absence of an ethics clause that would prevent government officials, including the President, from profiting from crypto interests while in office. Sen. Elizabeth Warren (D-MA), a fierce crypto critic, slammed the bill for lacking protections against what she calls “Trump’s crypto corruption,” noting that the President and his family have reportedly gained at least $1.4 billion from crypto deals since taking office.
And in a truly bizarre twist, the bill’s draft has been quietly amended to include a housing program called the Build Now Act, a federal funding initiative for local development. According to Sam Lyman of the Bitcoin Policy Institute, this appears to be a concession to both Sen. Warren and Sen. John Kennedy (R-LA), aimed at boosting bipartisan support and securing Kennedy’s vote. The irony, Lyman noted, is that Warren,a longtime crusader against big banks,has effectively ended up on their side in this fight. “It’s the biggest irony no one sees,” he joked.
As the Senate Banking Committee prepares to hash out the Clarity Act, the battle lines are drawn: crypto innovators versus traditional banks, community lenders versus Wall Street giants, and a President with his own financial interests in the game. The outcome will shape the future of digital assets in the U. S. for years to come.
(Source: The Verge)
