Senate delays the Clarity Act, stalling crypto’s stablecoin yield truce with banks. Here’s why the 616-page bill faces long odds before September.
The Clarity Act remains stuck in the Senate, freezing a pact between the crypto industry and banking on whether issuers of stablecoins can offer returns akin to interest. This agreement was tucked into the bill following months of talks aimed at stopping stablecoin interest payments from pulling deposits away from banks. Under the deal, issuers cannot pay users a return simply for keeping their stablecoin, but they are permitted to reward them for other activities. Of course, none of that will come to pass without the Senate passing the bill.
Thune has decided to prioritize other business over the crypto bill. The Senate began voting on confirmations on Monday, while another package of Russia sanctions is scheduled to come up Tuesday night, setting off the cloture process. Only one bill can sit on the floor at any given time, so the market structure legislation will have to wait.
The Russia sanctions bill is now called the Lindsey Graham Sanctions Package. Graham’s funeral takes place this week, and will dominate the attention of senators in D.C. and in South Carolina, his home state.
It’s unlikely that there will be a vote on the Clarity Act until next week, just before the Senate breaks for its August recess. Should that not occur, then September will likely be the next opportunity.
The Ethics Dispute Remains
In addition to scheduling, the bill itself is still unfinished. Negotiators are deadlocked on a Democrat-proposed provision that would prevent senior government officials, including President Donald Trump, from holding financial interests in the crypto space. Trump stated last week that he is willing to accept the amendment, though Democrats say it would not cover his current crypto positions.
External influences are weighing in on the deadlock, as well. Progressive groups Indivisible and Demand Progress have written to Democratic senators, expressing concern over Gillibrand’s efforts to reach a deal. On the other side of the aisle, Fairshake, the super PAC supporting crypto legislation, has nearly $125 million at its disposal.
GOP Sens. Bernie Moreno, Cynthia Lummis, and Thom Tillis have also taken the issue to the White House. Still short of 60 votes, the Senate bill currently has the backing of Dems. Ruben Gallego and Angela Alsobrooks, who back the Banking Committee’s initial version of the bill.
Long odds for the 616-page proposal
At 616 pages long, the proposed bill includes 104 sections and four divisions. It is built from a combination of the Banking and Agriculture committee bills, the ethics provisions, the law enforcement section and amendments to last year’s GENIUS Act. According to Galaxy Research, the chances of passage stand at 30%, and Sen. Elizabeth Warren (D-MA) is among the most vocal opponents.
Meanwhile, state regulators have voiced their concerns over the legislation, as well. In testimony, New York Attorney General Letitia James said the proposal would strip state authority and replace it with the CFTC. This change would make it harder for state governments to combat fraud. In fact, she said her office has seen its fraud-related complaints triple in the last three years.
Even if the Senate passes the bill, it would still need to clear a fractured House of Representatives and a president who previously turned down a bill on voter-ID requirements. For Circle CEO Jeremy Allaire, the delay represents more than just a clash between banks and crypto. It’s also a significant setback to the adoption of cryptocurrencies by institutions. The Bank Policy Institute continues to urge that stablecoin issuers should operate under the same regulatory framework as banks.