CLARITY Act Status Update

As previously reported by Reuters, supporters argue that the bill is needed to address entrenched, unresolved problems faced by crypto companies and to provide clearer rules. 

One of the core goals of the legislation is to establish more consistent guidance on when crypto tokens should be treated as securities, commodities—an issue the industry says has created legal uncertainty for years.

Beyond classification, the CLARITY Act also contains a compromise provision aimed at cooling a heated dispute between crypto firms and the traditional banking sector. 

Under an agreement brokered by Senator Thom Tillis and Senator Angela Alsobrooks, the bill would prohibit customer rewards on idle holdings of stablecoins. 

The justification is that stablecoins are often seen as resembling bank deposits, and lawmakers want to prevent stablecoin issuers from offering incentives in a way that functions like interest on traditional accounts. At the same time, rewards for other stablecoin-linked activities—such as sending payments—would remain permitted.

Crypto Vs. Banks

Banking trade groups have opposed the stablecoin-rewards provision, arguing that it gives crypto companies too much flexibility and could pull deposits away from the regulated banking system. 

In response, banks have launched what they describe as a last-ditch effort to win over skeptical Republicans on the Senate Banking Committee ahead of the hearing. 

On Sunday, the American Bankers Association CEO sent a letter to member bank CEOs urging them to contact their senators and press for a change, warning that—without modifications—the provision could create economic risks.

The banking industry’s campaign is also tied to concerns about a “loophole” they say stems from the country’s first crypto bill, the stablecoin-focused GENIUS Act, enacted last year. 

That legislation allowed certain intermediaries to pay interest on stablecoins, and banks argue that doing so could cause a shift of deposits out of the insured banking system, potentially creating instability. 

From the banking perspective, the CLARITY Act is meant to address those issues. From the crypto industry’s standpoint, restricting third parties—such as exchanges—from paying interest on stablecoins would be anti-competitive.

However, Crypto In America reported on Monday that even if the yield-related stablecoin dispute does not stop the bill from moving forward at the committee stage, the question of ethics among other key provisions could complicate the politics surrounding the legislation. 

The report said that analysts expect the CLARITY Act to advance along party lines, with no Democrats on the Senate Banking Committee anticipated to vote in support. 

For now, all eyes are on May 14, when the Senate Banking Committee markup could either bring the CLARITY Act closer to final legislative momentum.

Featured image created with OpenArt, chart from TradingView.com