Author: Chloe, ChainCatcher
The U.S. Senate Banking Committee yesterday passed the Digital Asset Market Clarity Act (CLARITY Act) in a bipartisan vote of 15 to 9, ending a four-month stalemate for this crypto market structure bill. The key was two Democratic Senators, Ruben Gallego and Angela Alsobrooks, crossing party lines to vote in favor, allowing the bill to advance to the next stage. It now must be merged with the Agriculture Committee's version before being sent to the full Senate.
Following the news, the crypto market surged. Bitcoin climbed to $81,500, up about 3%. Coinbase's stock price soared over 8% intraday, MicroStrategy rose 7%, Galaxy Digital gained over 6%, and Circle, which had been down 6%, turned positive. On the same day, the S&P 500 index broke above 7,500 points for the first time, but crypto-related stocks significantly outperformed the broader market.
Core of the Bill: Ending the SEC and CFTC Jurisdiction Dispute
The CLARITY Act is considered the most important legislative goal for the crypto industry in Washington, D.C. Its core purpose is to end the long-standing gray area in jurisdictional authority over digital assets between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), a space that has left the crypto industry struggling to operate with unclear rules for years.
Specifically, the bill will clearly define which digital assets are commodities and which are securities, and set obligations for exchanges, brokers, and custodians. The bill also protects "non-custodial" software developers and blockchain validators from being classified as "money transmitters."
In the U.S., once classified as a money transmitter, entities are typically subject to obligations like FinCEN registration, anti-money laundering measures, transaction record-keeping, and suspicious activity reporting, with some activities possibly requiring state-level licenses. The controversy lies in the fact that non-custodial software developers do not actually hold or control user funds but could be drawn into money transmitter liability due to certain legal cases. The CLARITY Act aims to distinguish centralized financial intermediaries from developers merely providing code, drawing clearer legal boundaries for non-custodial activities.
Asheesh Birla, CEO of Evernorth, stated: "For years, U.S. blockchain entrepreneurs have been operating in regulatory purgatory. Regulatory clarity can unlock capital flows. Institutions that have been watching this space from the sidelines are now one step closer to having a framework to act upon." Mari Tomunen, General Counsel at DoubleZero, highlighted the pain points in the non-custodial space: "Existing guidance suggests non-custodial activities should not inherently pose legal risks as money transmission, but some legal theories and court rulings point in the opposite direction. The CLARITY Act will help establish clearer statutory boundaries for decentralized and non-custodial activities."
Cathy Yoon, General Counsel at Harmonic, believes this legislation symbolizes a shift in congressional attitude: "Moving from consideration to a full Senate floor vote symbolizes a growing recognition that not every crypto participant is playing the role of a financial intermediary. Thoughtful legislation can set rules for custodians and centralized participants while preserving space for validators, open networks, and software developers."
Dramatic Last-Minute Reversal
However, the deliberation process was not smooth. The entire morning session was shrouded in a partisan atmosphere, with intense debates over various amendments. The turning point came while senators were still debating, when Republican Chairman Tim Scott agreed to incorporate several amendments he had previously rejected, in an effort to persuade some Democratic senators to switch their support. These additional amendments covered three main areas: strengthening investor protection, clarifying the scope of crypto-related businesses banks can engage in, and defining what constitutes a "truly decentralized" DeFi project.
The last item was a long-standing issue championed by Democratic Senator Mark Warner, who advocated for stricter safeguards for DeFi. Notably, these additional amendments gained rare broad bipartisan support, in stark contrast to the earlier split along party lines for most amendments.
Democratic Senator Elizabeth Warren strongly protested the process, criticizing these amendments as "inadequate compromises." She ultimately voted against the bill, calling it "not ready," and argued the Senate has more urgent priorities than crypto industry legislation.
After the bill's passage, Scott told the committee members: "This is one of the most enlightening and also most challenging processes I've been through as a U.S. Senator. The number of hours you have spent talking to each other and learning about one another is incredible." He expressed confidence that both parties would continue to work together to resolve remaining issues.
Notably, the defections of Senators Ruben Gallego and Angela Alsobrooks were key to today's passage. Both were deeply involved in the bipartisan negotiations on the bill.
However, they also clearly stated that a committee vote does not guarantee support on the full Senate floor. Alsobrooks emphasized: "My vote today is a vote to continue negotiating in good faith. We still have a lot of work to do." She explicitly stated she would not extend this support in a full Senate vote if current concerns are not addressed. Gallego also said his final vote would depend on subsequent developments.
These statements foreshadow the real challenges ahead for the bill.
Two Major Hurdles: Ethics Provisions and the 60-Vote Threshold
Despite today's smooth passage, the bill faces significant obstacles before reaching President Trump's desk for signature.
The first hurdle is the government official conflict-of-interest provisions. Democrats have set these provisions as a condition for supporting a full Senate vote, requiring restrictions on financial ties between senior government officials and crypto companies. However, this review did not include those provisions. Democratic Senator Kirsten Gillibrand has repeatedly stated clearly that without these provisions, the bill cannot secure the 60 votes needed to pass the full Senate.
The White House has taken a firm stance on this. White House advisor Patrick Witt stated earlier this month at Consensus Miami 2026 that any provisions "specifically targeting the President" would be unacceptable. The deep involvement of Trump himself and his family in the crypto industry makes this issue particularly sensitive, leaving little room for bipartisan compromise on this matter.
The second hurdle is the Senate's 60-vote threshold. Currently, Republicans hold only 53 seats in the Senate, meaning at least 7 Democratic senators' support is needed. However, those votes are precisely tied to the ethics provisions Republicans are resisting, creating a legislative deadlock.
Regarding this deadlock, Cody Carbone, head of the crypto industry lobbying group Digital Chamber, analyzed for CoinDesk that a bipartisan agreement on the ethics provisions will likely be negotiated before the bill is scheduled for a full Senate vote. He explained: "They will only bring the bill to the floor for a vote when they are confident they have the 60 votes." Simply put, the Senate Majority Leader will not risk scheduling a bill that might fail; it's basic political rules.
Therefore, the industry generally expects the final version of the ethics provisions to be determined through behind-the-scenes negotiations first. By the time the bill actually reaches the Senate floor, all key disputes should be settled. Carbone further pointed out that the entire process must be completed before the August congressional recess, or the bill risks missing this year's legislative window. This timeline aligns with the recent assessment of Democratic Senator Kirsten Gillibrand, who also believes the chances of passing the bill this year would significantly decrease if it cannot advance before the summer recess.
Additionally, concerns about financial crime remain a worry for the bill. Beyond the ethics provisions, some Democratic senators remain concerned about whether the bill can effectively prevent crypto and DeFi technologies from being used for financial crimes. Law enforcement-related provisions are also a key issue that must be resolved in subsequent negotiations; otherwise, securing sufficient Democratic support will be difficult.
Traditional Finance's Last-Minute Push Fails
Also, in the week before the vote, the U.S. banking industry mobilized strongly against the CLARITY Act. The American Bankers Association (ABA) sent over 8,000 letters to Senate offices, warning that the bill's "stablecoin yield" provisions could lead to a massive outflow of deposits from traditional banks to the crypto industry.
The final version of the bill adopted a compromise reached in early May this year by Senator Thom Tillis (Republican) and Senator Angela Alsobrooks (Democrat): prohibiting stablecoin companies from paying passive interest akin to savings accounts (i.e., interest earned simply by holding funds) but allowing "use-based" rewards (e.g., users can receive rewards for activities like trading, transferring, or staking).
When this compromise was announced on May 4th, Circle's stock price surged nearly 20% in a single day, showing the market's reaction. The banking industry believes this compromise is too favorable to stablecoin companies. Traditional banks worry that even with passive interest banned, the gray area of "use-based rewards" could still attract a large outflow of deposits, especially from younger generations and tech-savvy users.
In a report in early May, Bank of America analyst Ebrahim H. Poonawala, while believing the overall compromise was a "net positive for banking" as it alleviated regulatory uncertainty, the ABA clearly did not share this optimistic assessment, leading to the large-scale mobilization on the eve of the vote.
From today's vote result and market reaction, the banking industry's last-minute lobbying offensive did not succeed. The bill passed smoothly 15 to 9, with the stablecoin-related provisions remaining unchanged, leading to Circle's stock price turning positive on the voting day, reflecting the market's view that the stablecoin industry held its ground in this legislative battle.
Miss August, Wait Until 2030
The crypto industry, of course, expressed high praise for this vote. Summer Mersinger, CEO of the Blockchain Association, called it a "decisive moment" and stated in a release: "Digital asset policy must be built on a bipartisan foundation. Today's vote reflects the growing bipartisan recognition that the United States needs clear rules of the road." She also noted the bill would help provide consumers with access to compliant and innovative financial products, benefiting consumers and reducing American users' reliance on offshore platforms.
However, the process ahead is quite complex. First, the version passed by the Banking Committee must be merged with the version passed along party lines by the Senate Agriculture Committee in January. The consolidated bill will then be sent to the full Senate for a vote, requiring 60 votes to pass.
After passing, the bill must go to the House of Representatives for another vote. The House already passed a similar version in July 2025 by a wide margin of 294 to 134, so House support is relatively more assured. If the final versions from both chambers are consistent and legislation is completed, the SEC, CFTC, and Treasury Department will be authorized to begin drafting implementation rules.
It's estimated the entire rulemaking process will extend into 2027, with most compliance deadlines expected between 2027 and 2028. In other words, even if the bill successfully passes Congress this summer, the crypto industry will likely not operate under the new regulatory framework until 2027 or later.
There's also another time pressure: If they miss August this time, they might have to wait until 2030.
"Successful passage through Congress" itself is an unknown, as the Senate's legislative calendar is tight, with the summer recess and midterm elections approaching, creating immense time pressure for advancing the bill. Republican Senators Cynthia Lummis and Bernie Moreno have publicly warned that if the bill cannot advance before the August congressional recess, the next feasible legislative window might not come until 2030. This means if they miss this summer's opportunity, the crypto industry may have to wait several more years for substantial legislative progress.
Perhaps for U.S. crypto operators who have been stuck in "regulatory purgatory" for years, today's 15-to-9 vote represents the most critical milestone on this long legislative road. But ahead lies a tough race against time.
