Editor's Note: The U.S. cryptocurrency regulation is once again entering a key window. On May 14, the U.S. Senate Banking Committee will review the "CLARITY Act," a long-awaited legislation driven by the cryptocurrency industry, attempting to establish a clearer regulatory framework for the U.S. digital asset market. Its essence is not only "a positive development for the crypto industry," but also the U.S. attempting to reintegrate past unresolved regulatory disputes into the congressional legislative process.
Specifically, the "CLARITY Act" mainly addresses three issues.
First, clarifying the SEC and CFTC's regulatory boundaries regarding digital assets. Over the past few years, crypto companies have long faced issues of regulatory ambiguity: whether an asset should be regulated by the securities regulator SEC or the commodities regulator CFTC often depended on enforcement and case-by-case judgment. If this bill can be implemented, it will provide clearer authority boundaries for regulatory agencies, reducing the legal uncertainty the industry has faced for a long time.
Second, determining when a token is classified as a security, commodity, or other category. This is one of the most critical compliance issues in the crypto industry. For project teams, trading platforms, and investors, token attributes determine issuance, trading, disclosure, and regulatory responsibilities. The bill attempts to provide a more stable legal identity for digital assets through institutionalized classification, establishing basic rules for future industry product design and market access.
Third, through stablecoin yield provision clauses, easing the conflict between crypto companies and banks regarding deposit outflow. According to the current compromise, users holding idle USD stablecoins cannot receive interest rewards similar to deposit interest because it is considered too similar to bank deposits; however, rewards related to stablecoin usage scenarios such as payments and transfers will still be allowed. In other words, the regulation is trying to determine whether stablecoins are primarily payment tools or a quasi-deposit product.
This is also the most contentious point of conflict between the banking industry and the crypto industry. Banks are concerned that if intermediary institutions such as trading platforms can reward stablecoin holders, funds may flow out of the insured banking system, weakening the traditional banking deposit base and bringing financial stability risks. Crypto companies, on the other hand, believe that prohibiting third parties from providing rewards around stablecoins fundamentally protects the interests of banks, limiting market competition.
Therefore, the significance of the "CLARITY Act" has transcended the crypto industry itself. It is not only about token classification and regulatory agency division of labor, but also about redefining the financial boundaries between banks, trading platforms, stablecoin issuers, and payment platforms: how much like bank deposits can stablecoins be? How deeply can crypto companies enter payment and savings scenarios? Can traditional banks continue to monopolize the "USD balance interest" right?
Next, whether the bill can gain enough support from Democratic senators will determine whether US crypto regulation can transition from years of back-and-forth to actual implementation. The most noteworthy aspect is not whether the CLARITY Act is simply a "pro-crypto" move, but that the US is making stablecoins and digital assets a core theme in the competition for financial infrastructure. Once the regulatory boundaries are defined, the future allocation of interests between crypto companies and traditional banks will also be rewritten.
The original text is as follows:
US senators are expected to debate long-awaited legislation next week. The bill will establish a regulatory framework for cryptocurrency and could potentially break the deadlock that has surrounded the bill. This deadlock had once led to a standoff between crypto companies and the US banking sector.
The bill, known as the CLARITY Act, if signed into law, will clarify the financial regulatory agencies' jurisdiction over this rapidly growing industry and may further drive the adoption of digital assets.
Senator Tim Scott, Chairman of the Senate Banking Committee, announced on Friday that the committee will hold an executive session on May 14 at 10:30 AM (2:30 PM GMT) in the Dirksen Senate Office Building in Washington D.C.
The crypto industry has been advocating for this legislation, stating that it is vital for the future sustainability of American digital assets and necessary to address long-standing core issues plaguing crypto companies. Among other provisions, the bill will define under what circumstances crypto tokens are considered securities, commodities, or other categories, providing legal certainty to the industry.
The bill also includes a provision aimed at resolving a heated dispute between crypto companies and the banking sector. Through a compromise brokered by Republican Senator Thom Tillis and Democratic Senator Angela Alsobrooks, incentives for distributing rewards to customers holding unused US dollar-backed stablecoins will be prohibited, as such arrangements are deemed too similar to bank deposits.
However, rewards generated from other activities related to stablecoins, such as payment transfers, will be permitted. Banking trade organizations oppose this arrangement, arguing that it gives crypto companies too much leeway and may lead to deposits flowing out of regulated banking systems.
Prior to the hearing, the banking sector is making a final push to garner support from some Republican members of the Senate Banking Committee to switch sides, but it is currently unclear whether they will succeed.
Banking industry lobbyists have been hoping to introduce amendments to the CLARITY Act to plug the "loophole" created by a law passed last year. This loophole allows intermediaries to pay interest on stablecoins. Banks argue that this could lead to deposits flowing out of the insured bank system, potentially threatening financial stability.
The crypto industry, on the other hand, argues that banning third parties such as crypto exchanges from paying interest on stablecoin holdings would constitute anti-competitive behavior.
The crypto sector is hopeful that the CLARITY Act will receive approval in the coming months, aiming to pass the legislation before the November midterm elections. At that time, the Democratic Party could potentially regain control of the House of Representatives.
The House passed its version of the CLARITY Act in July last year, but the Senate will need to approve the bill by the end of 2026 to send it to U.S. President Donald Trump for signing.
Many congressional Democrats have been opposed to the bill, arguing that it lacks sufficient anti-money laundering provisions and should take further steps to prevent elected officials from benefiting from crypto projects.
For the bill to pass the Senate floor, it would need support from at least seven Democratic senators.
President Trump had actively courted crypto industry funds and pledged to be a "crypto president." Meanwhile, his family's own crypto business has also propelled the industry further into the mainstream spotlight.
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