U.S. Senate committees are making strides with the "Clarity Act," a proposed crypto market structure bill. Its primary goal is to establish comprehensive regulatory frameworks for digital assets. The legislation aims to clearly define the roles of the Securities and Exchange Commission (SEC) and Commodities Futures Trading Commission (CFTC), classify various crypto tokens, and set out compliance standards for industry participants.
While the Senate Agriculture Committee recently advanced its version of the bill, the Senate Banking Committee's markup session faced delays. These delays stem from ongoing disagreements on critical provisions, including the ability to earn stablecoin yields, the regulation of decentralized finance (DeFi), and ethics provisions for public officials.
Legislative Progress and Delays
The "Clarity Act" has experienced varying degrees of progress within the Senate. The Senate Agriculture Committee officially moved its version of the crypto market structure bill forward on Thursday. The vote was 12-11, along party lines, with support from Republicans. This advancement marks the furthest a crypto policy initiative has gone in the Senate to date, according to some reports. Democrats on the committee have expressed a desire for continued negotiations to achieve a bipartisan version of the legislation.
However, the Senate Banking Committee's scheduled markup session for the "Clarity Act" was canceled. This cancellation followed an announcement from Coinbase, a major crypto exchange, which withdrew its support for the bill. Coinbase CEO Brian Armstrong articulated his preference, stating:
"No bill than a bad bill."
Armstrong attributed the issues with the bill to lobbying efforts from traditional banks. He specifically cited objections regarding the ability for crypto owners to earn interest on stablecoins. Consequently, the Banking Committee's markup session remains pending due to this significant dispute over stablecoin yields.
Bill Objectives and Key Provisions
The proposed "Clarity Act" is designed to implement legislative guardrails for the burgeoning crypto market. Its key objectives include:
- Clarifying the regulatory roles of the SEC and CFTC concerning cryptocurrencies.
- Establishing defined classifications for various crypto tokens.
- Outlining comprehensive registration and compliance standards for crypto brokerages, exchanges, and other entities to facilitate their legal operation in the U.S.
- Potentially accelerating the adoption of blockchain technology and crypto within the United States.
A draft of the Senate Banking Committee's version of the bill introduces a "non-ancillary" legal status for certain crypto assets. This classification could exempt these assets from SEC disclosure requirements.
Under this provision, tokens included in a listed exchange-traded product (ETP) as of January 1, 2026, would be classified as non-ancillary assets, meaning they would not be treated as securities.
Based on current ETP listings, this classification could extend to cryptocurrencies such as XRP, Solana, Litecoin, Hedera, Dogecoin, and Chainlink, granting them a regulatory status akin to Bitcoin and Ethereum. Experts suggest that such a classification would primarily impact institutional compliance and access to these assets, rather than causing immediate short-term price fluctuations.
Points of Contention
Several critical issues have emerged as major points of negotiation and contention, hindering the bill's progress:
Stablecoin-Linked Rewards
The ability for crypto owners to earn interest on stablecoins is a significant point of discussion. While one crypto trade association indicated that stablecoin rewards would be addressed in the bill with agreement from both Republicans and Democrats, the precise nature of these provisions remains a source of dispute. The American Bankers Association's Community Bankers Council has strongly urged Senate members to prevent stablecoin issuer affiliates from offering such rewards. They contend:
"Such products could exploit a loophole in existing legislation and serve as an alternative to high-yield savings accounts."
Decentralized Finance (DeFi) Platforms
Crypto advocates are actively working to ensure that developers are not held liable when their technology is used for illicit activities. They emphasize the importance of placing legal obligations on individuals rather than on the underlying code itself. These advocates also push for provisions that allow individuals to self-custody their crypto assets. Furthermore, they seek to incorporate elements from the Blockchain Regulatory Certainty Act, which exempts software developers and blockchain service providers who do not control or custody customer funds from registering as money-transmitting businesses. Democrats on the Agriculture Committee have specifically criticized the bill's current approach to DeFi.
Ethics Provisions for Elected Officials
Some lawmakers, notably Senator Elizabeth Warren (D-Mass.), aim to prevent public officials from profiting from digital asset ventures while in office. Democrats on the Agriculture Committee voiced significant concerns about the absence of such ethics provisions, particularly referencing reported blockchain interests of former President Trump. Senator Cory Booker (D-N.J.), a lead Democratic negotiator, criticized this lack of ethics provisions, citing potential financial gains by the President and his family from the industry. An amendment attempting to introduce an ethics provision failed along party lines during the Agriculture Committee hearing. The White House reportedly plans a meeting to seek common ground among stakeholders, though Senator Booker stated that the White House's stance has made progress on the bill more challenging.
Industry Reaction and Legislative Outlook
Despite Coinbase's withdrawal of support, other prominent crypto industry players, including Kraken, a16z, Ripple, and White House advisor David Sacks, have reaffirmed their backing for the Senate bill. These figures consistently emphasize the crucial importance of establishing a clear regulatory framework to address the long-standing uncertainty in the crypto market.
"The importance of securing a regulatory framework to address long-standing uncertainty in the crypto market."
The crypto industry continues to increase its financial contributions in Washington, D.C. A leading network of Super PACs has reported substantial funds for the 2026 midterm elections, with contributions from major players such as Coinbase, Ripple, and Andreessen Horowitz.
The legislative timeline is tight, with a limited window remaining before members of Congress begin their re-election campaigns. The ultimate fate of the bill is uncertain due to the current U.S. political landscape, with its finalization potentially tied to upcoming elections. Forthcoming midterm elections are expected to further reduce bipartisan consensus. The legislative process involves renegotiating language, securing approval from both the Banking and Agriculture Committees, and subsequently obtaining a full Senate vote. Delaying the bill until next year presents significant risks, as a potential shift in congressional control could severely impact its prospects.
To successfully become law, the bill must clear the Senate Banking Committee, have its distinct versions from both committees combined, be approved by a full vote in the Senate, receive approval from the House of Representatives (which passed its own version in July or August), and finally be signed into law by the President. The White House plans a meeting to seek common ground among different stakeholders. Chairman Boozman supported a Democratic request to ensure the Commodity Futures Trading Commission (CFTC) is fully staffed, preparing it for a potential leading role in overseeing the crypto market.