The Clarity Act, a comprehensive framework for digital assets, has stalled in the Senate as internal industry disputes intensify and major players distance themselves from the effort. A clash with the banking lobby, rushed amendments, and the approach of congressional elections have left the bill’s fate uncertain. While the House previously passed a version with strong crypto lobbying support, the current obstacle now threatens its passage before lawmakers turn to fall elections. Coinbase’s decision to publicly withdraw support this week underscored the sector’s divisions and pressured lawmakers to recalibrate.
The act would delineate which agencies should oversee digital assets and set rules for a broad range of instruments, from bitcoin to niche derivatives. A central dispute concerns payments to holders of stablecoins, with banks seeking to cap such rewards to avoid deposit flight and lending disruption. Banks argue that generous yields on dollar-denominated tokens could divert funds from traditional banks, potentially curtailing lending to small and medium-sized businesses. Crypto lobbyists warn that intensified political scrutiny after the midterms could create a more challenging regulatory environment for the sector.
The nearly 300-page bill remains in limbo as the Senate recesses, with momentum hinging on external pressure, including from the White House. During deliberations over the bill, crypto companies ran into resistance from the banking lobby. The central dispute concerns rewards paid to holders of stablecoins—digital tokens pegged to the US dollar. Banks are pushing to cap such payments, arguing that the ability to earn more on dollar-denominated tokens than on bank deposits would trigger a “deposit flight” and undermine lending.
Bank of America chief executive Brian Moynihan said this week during an investor conference call that an outflow of funds from the traditional banking system would “reduce banks’ lending capacity, hitting small and medium-sized businesses especially hard,” while large borrowers have access to alternative sources of financing. Donald Trump declared cryptocurrency a national priority, including by signing the so-called Genius Act aimed at regulating stablecoins. US banks, according to Geoff Kendrick, global head of digital assets research at Standard Chartered, are “spending enormous sums in Washington” lobbying for a ban on crypto companies paying interest. In his words, banks “fully understand that they have a problem” when it comes to competition.
Another flashpoint has been tokens that represent ownership rights in equities. Crypto industry representatives are angered that last-minute language was added to the bill that makes it harder to obtain approval for trading such instruments. Jonathan Jachim, global head of policy and government relations at the crypto exchange Kraken, said the changes had “created unnecessary friction and distracted attention.” At the same time, participants in the decentralized finance sector are clashing with policymakers and traditional market-makers over anti-money-laundering requirements and other control mechanisms. They argue that such rules make it harder to build crypto systems without centralized governance and therefore slow innovation.
Taken together, these conflicts prompted Coinbase to reverse its position at the last minute, while a Senate committee session to consider amendments—the so-called mark-up—was cancelled overnight, on the eve of the meeting. “There are multiple forces at play here, and all of them converged at the last minute around a bill that was still being negotiated literally hours before the session itself,” said Ron Hammond, head of policy and advocacy at Wintermute. Democrats, for their part, are pressing for restrictions on public officials who profit from ties to the crypto business—a move partly aimed at the Trump family’s extensive crypto interests. Crypto lobbyists fear that if Democrats expand their representation after the November midterm elections or gain control of even one chamber of Congress, the digital-asset sector will find itself in a far more skeptical political environment.
The fate of the nearly 300-page bill remains uncertain—the Senate has gone into recess, and no date has yet been set for a renewed committee vote. It still has momentum, and that is what matters most here—the factor that either kills an initiative or pushes it forward. The moment the bill loses political momentum, I will consider it dead. But for now it is still being sustained by significant external pressure, including from the White House.
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