Editor's Note: US crypto regulation enters another critical window. On May 14, the US Senate Banking Committee will review the CLARITY Act, a long-promoted piece of legislation in the crypto industry that seeks to establish a clearer regulatory framework for the US digital asset market. Its core is not simply that 'the crypto industry welcomes good news,' but that the US is attempting to bring regulatory disputes that have been unresolved for years back into the Congressional legislative process.
Specifically, the CLARITY Act primarily addresses three issues.
First, it clarifies the regulatory boundaries between the SEC and CFTC over digital assets. For years, crypto companies have faced unclear regulatory jurisdiction: whether an asset should be regulated by the securities regulator SEC or the commodities regulator CFTC often depends on enforcement and case-by-case judgment. If enacted, this bill would delineate clearer jurisdictional boundaries for regulators, reducing the legal uncertainty the industry has long faced.
Second, it determines when a token qualifies as a security, commodity, or other category. This is one of the core compliance issues in the crypto industry. For project developers, trading platforms, and investors, the nature of a token determines issuance, trading, disclosure, and regulatory responsibilities. The bill attempts to provide a more stable legal identity for digital assets through institutionalized classification, establishing foundational rules for future product design and market access in the industry.
Third, it aims to ease conflicts between crypto companies and banks over deposit outflows through stablecoin reward provisions. According to the current compromise, users holding idle US dollar stablecoins cannot receive rewards similar to deposit interest, as this is considered too similar to bank deposits; however, rewards related to stablecoin use cases like payments and transfers will still be allowed. In other words, regulators are trying to distinguish whether stablecoins are payment tools or a type of disguised deposit product.
This is also where the conflict between the banking and crypto industries is most acute. Banks worry that if intermediaries like trading platforms can pay yields to stablecoin holders, funds may flow out of the insured banking system, weakening the deposit base of traditional banks and posing financial stability risks. Crypto companies argue that prohibiting third parties from providing returns on stablecoins essentially protects existing bank interests and restricts market competition.
Therefore, the significance of the CLARITY Act extends beyond the crypto industry itself. It not only classifies tokens and assigns roles to regulators but also redraws the financial boundaries among banks, trading platforms, stablecoin issuers, and payment platforms: How much can stablecoins resemble bank deposits? How deeply can crypto companies enter payment and savings scenarios? Can traditional banks continue to monopolize the right to 'earn interest on US dollar balances'?
Next, whether the bill can gain enough support from Democratic senators will determine if US crypto regulation can move from years of tug-of-war to actual implementation. The most noteworthy aspect is not whether the CLARITY Act simply 'benefits crypto,' but that the US is bringing stablecoins and digital assets into the core debate of financial infrastructure competition. Once regulatory boundaries are set, the future distribution of interests between crypto companies and traditional banks will also be rewritten accordingly.
The following is the original text:
U.S. senators are expected to review long-awaited legislation next week that would establish a regulatory framework for cryptocurrency and could break an impasse that has pitted crypto companies against the U.S. banking industry.
The bill, known as the CLARITY Act, would, if signed into law, clarify financial regulators' jurisdiction over the fast-growing sector and could help further the adoption of digital assets.
Senate Banking Committee Chairman Tim Scott said Friday the panel will hold an executive session at 10:30 a.m. ET (14:30 GMT) on May 14 in the Dirksen Senate Office Building in Washington, D.C.
The crypto industry has been pushing for the legislation, saying the future of U.S. digital assets depends on it and that it is needed to solve central problems that have long plagued crypto companies. Among other things, the bill would define when crypto tokens are securities, commodities or another category, giving the industry legal certainty.
The bill also includes a provision aimed at settling a fierce debate between crypto companies and the banking industry. Under a compromise brokered by Republican Thom Tillis and Democrat Angela Alsobrooks, rewards paid to customers for holding idle U.S. dollar-backed crypto tokens, known as stablecoins, would be banned because the arrangements resemble bank deposits.
Rewards tied to other stablecoin activities, such as payments and transfers, however, would be allowed. Banking trade groups have opposed that setup, saying it gives crypto companies too much leeway to lure deposits out of the regulated banking system.
Before the hearing, the banking industry is making a last-ditch effort to turn some Republicans on the Senate Banking Committee against the bill, though it is unclear if they will succeed.
Banking lobbyists have wanted to add changes to the CLARITY Act to close what they call a "loophole" in legislation signed into law last year that allows intermediaries to pay interest on stablecoins. Banks say that would draw deposits out of the insured banking system and could threaten financial stability.
Crypto companies say banning third parties such as crypto trading platforms from paying interest on stablecoins would be anticompetitive.
The crypto industry is hoping to pass the CLARITY Act in the coming months, before November's midterm elections, when Democrats could retake control of the House of Representatives.
The House passed its version of the CLARITY Act in July last year, but the Senate would need to pass the bill by the end of 2026 to send it to U.S. President Donald Trump for signature.
Many congressional Democrats have opposed the bill, saying it doesn't go far enough on anti-money-laundering provisions and that more needs to be done to prevent political figures from profiting from crypto projects.
The bill would need the support of at least seven Democrats to pass the full Senate.
President Trump has aggressively courted crypto industry cash and vowed to be a "crypto president," even as his family's own crypto business has pushed the sector further into the mainstream.
