Original | Odaily Planet Daily (@OdailyChina)
Author | Golem (@web3_golem)
On May 14th, after several hours, the U.S. Senate Banking Committee finally passed the review of the CLARITY Act, advancing the bill to the full Senate vote stage.
This committee approval is significant for the CLARITY Act because it had been stalled in the review stage for over 4 months since January due to disagreements between the banking industry and the crypto industry over stablecoin yield regulations. In the latest version of the bill, this core disagreement has been resolved: stablecoins are still not allowed to pay rewards similar to bank deposit interest, but they are permitted to pay rewards based on real activities or transactions, leaving room for stablecoin businesses to survive.
However, clearing this major obstacle does not guarantee smooth sailing for the future implementation of the CLARITY Act. This is because the CLARITY Act involves not only the conflicting interests of two major industries (banking and crypto) but has also been drawn into the political tug-of-war between the two U.S. parties (Republicans and Democrats). The outcome of this game is determining whether the CLARITY Act can secure enough votes in the full Senate vote.
CLARITY Act Forces Its Way Through
The U.S. Senate Banking Committee ultimately succeeded in passing the review of the CLARITY Act with a vote of 15 to 9. Judging from the voting outcome and support rate, the CLARITY Act can be considered as having forced its way through.
The current U.S. Senate Banking Committee has 24 members, including 13 Republicans and 11 Democrats. Republicans hold a majority of seats on the committee. Therefore, theoretically, even if all Democrats on the committee opposed it, Republicans could still force the CLARITY Act through review with a vote of 13 to 11 based on their seat advantage. But this would be the worst-case scenario, as it would essentially mean no consensus was reached between the two parties on the CLARITY Act. Even if advanced to the full Senate vote stage, it would be almost impossible for the bill to secure enough votes to pass.
Therefore, compared to the result of the CLARITY Act review being passed, the number of Democratic votes it received in the Senate Banking Committee is more important. This is a strong signal that can indirectly reflect the support rate for the CLARITY Act between the two parties and the difficulty of its subsequent passage in the full Senate vote.
However, the final voting result of 15:9 in the committee on May 14th is not much more optimistic than the worst-case scenario of 13:11. The voting blocs were very clear: all 13 Republican committee members voted in favor, only 2 Democratic committee members defected to support it, and the remaining 9 Democratic committee members all opposed. The supporting Democratic members were Ruben Gallego from Arizona and Angela Alsobrooks from Maryland.
Before the CLARITY Act review began, the market anticipated that the votes of 5 Democratic committee members with a swing stance would be crucial. How many of their affirmative votes Republicans could secure would affect the smoothness of the subsequent progress. They were:
- Mark Warner: From Virginia, a member of the Securities Subcommittee and the Digital Assets Subcommittee. He voted in favor of the GENIUS Act and the SAB 121 bill.
- Angela Alsobrooks: From Maryland, she co-led the stablecoin yield compromise solution with Thom Tillis and has been the most active representative in negotiations on the bill text within the Democratic Party.
- Ruben Gallego: From Arizona, the ranking Democratic member of the Digital Assets Subcommittee. He voted to support the GENIUS Act.
- Catherine Cortez Masto: From Nevada, a member of the Financial Institutions and Consumer Protection Subcommittee. She had reservations about the law enforcement-related provisions in the Blockchain Regulatory Certainty Act (BRCA) and had been urging revisions to address these concerns.
- Raphael Warnock: From Georgia, a member of the Senate Economic Policy Subcommittee. He has strongly advocated for strengthening anti-money laundering and combating illicit finance measures and voted in favor of the GENIUS Act.
In the end, only 2 of these 5 Democratic committee members cast affirmative votes, and these two votes of support were "hostage votes." Alsobrooks explicitly stated after the vote that her support was to allow the conversation to continue on the Senate floor, and if the issues were ultimately not resolved, she and Gallego could change their minds at any time during the full Senate vote.
Currently, the U.S. Senate has a total of 100 Senators, with Republicans holding 53 seats, Democrats 45 seats, and Independents holding 2 seats. Considering that the two independents (Bernie Sanders and Angus King) consistently vote with the Democrats, the actual party lineup ratio in the Senate is 53:47, with Republicans as the majority party.
Although Republicans used their seat advantage to force the bill through in committee, in the upcoming full Senate vote, the CLARITY Act needs 60 votes to pass. Assuming no Republicans defect, Republicans would still need the support of at least 7 Democratic Senators.
For Republicans to gain support from at least 7 Democratic Senators appears challenging based on the current committee vote results, as they failed to secure the full support of any Democratic committee member. Galaxy stated before the Banking Committee review that if the CLARITY Act passed with only a party-line vote or close to it, the difficulty of securing 60 votes in the Senate would significantly increase, thereby dimming its prospects for passage in 2026.
Political Tug-of-War Between U.S. Parties Over the CLARITY Act
During the Banking Committee review of the CLARITY Act, the two parties engaged in intense debate over numerous amendments. Over 100 amendments were submitted to the committee by Senators in total, with Democratic Senator and Banking Committee member Elizabeth Warren alone submitting over 40. However, several amendments proposed by Democrats were rejected by Republicans using their seat advantage. The failure to satisfy multiple demands also contributed to the final outcome where the CLARITY Act forced its way through with a 15:9 vote.
Among them, the ethics amendment became the core battleground for Democrats. Democratic members had long sought to include this provision in the bill. During the review session, Democratic committee member Chris Van Hollen proposed it again, aiming to prohibit senior government officials, including the President and Vice President, from having business interests in the crypto industry and to strengthen transparency requirements. In his remarks, he specifically mentioned the association between Trump, his family, and World Liberty Financial.
However, Republican committee member Bernie Moreno opposed the amendment, stating he believed "this is not within the scope of the Banking Committee review." Ultimately, the amendment failed to pass with a party-line vote of 11 in favor and 13 against. The Democrats' persistent push for the ethics amendment is not merely for integrity; essentially, they view the crypto industry as a new capital alliance for the Republican Party and believe the current CLARITY Act would pave the way for the Trump camp's future new financial coalition.
Although crypto lobbying groups (such as the Fairshake Super PAC and its affiliated organizations) have shifted their funding strategies in recent years, no longer solely funding one party but specifically supporting and courting pro-crypto lawmakers, the majority of their political contributions still go to Republicans. Democrats are well aware that if the CLARITY Act passes without ethical restrictions, Republican leaders could legally amass enormous wealth by holding and promoting crypto assets.
Increasing the compliance difficulty for officials holding crypto is essentially also reducing the penetration rate of cryptocurrency as a "compliant safe-haven asset" among the elite. Besides traditional banks, unions and other foundational middle-class groups in the U.S. are also staunch Democratic voters. Therefore, insisting on pushing the ethics amendment is also a way for Democrats to use the moral high ground of "anti-corruption" for political mobilization, aiming to win over traditional middle-class voters who are uneasy about crypto volatility.
Of course, Democrats also know that completely opposing the crypto industry would certainly lose some of the younger voter base. Therefore, apart from progressive Democrats like Elizabeth Warren who vehemently oppose and obstruct crypto, there are also moderate, swing young Democratic lawmakers who are open to crypto.
In addition to the ethics amendment, Democrats had different demands regarding anti-money laundering regulations and the Blockchain Regulatory Certainty Act (BRCA), among other areas. However, these amendments were similarly rejected by Republicans using their seat advantage. Therefore, the committee's approval of the CLARITY Act this time did not resolve the issues between the two parties; it was the result of Republicans forcefully advancing the bill's progress. All the problems will accumulate and be addressed during the full Senate vote.
This means that the anti-money laundering and ethics amendments rejected in committee today will certainly become the ultimate weapons for Democrats to demand political concessions during the full Senate vote. Without substantive compromises or quid pro quo exchanges, this crucial bill for the crypto industry is highly likely to face fierce obstruction.
Future Prospects of the CLARITY Act
The motivation for Republicans to rush the review of the CLARITY Act is also evident. Republican Cynthia Lummis had stated multiple times previously that if the CLARITY Act is not passed this year, it might be delayed until 2030 or later.
This is because the power balance may shift in the 120th Congress (convening in January 2027). New committees and new political motivations will affect the legislative process of the CLARITY Act. If Democrats gain a majority in the new Senate and House, and Democrats like Elizabeth Warren or Sherrod Brown, who hold "hostile attitudes" towards crypto, chair the Senate Banking Committee, the probability of the CLARITY Act passing becomes even lower.
Therefore, Republicans must pass the CLARITY Act in the Senate before the environment becomes more complicated. Considering the Senate's August recess and the subsequent midterm election season, this requires Republicans to schedule the full vote before July, with the White House's ideal target being for the President to sign the bill into law before July 4th (the 250th anniversary of U.S. independence).
However, considering the final voting result in the Senate Banking Committee on May 14th and the Democrats' tough stance, for the CLARITY Act to pass smoothly in the Senate may require Republicans to demonstrate extraordinary "political skill" and coordination ability.
As of May 15th, the probability of the CLARITY Act being signed into law within 2026 on Polymarket is 68%, while the real probability might be much lower......
