Author: Chloe, ChainCatcher

The U.S. Senate Banking Committee yesterday passed the “Digital Asset Market Clarity Act” (CLARITY Act) with a bipartisan vote of 15 to 9, ending a four-month stalemate on this cryptocurrency market structure legislation. The key was two Democratic senators, Ruben Gallego and Angela Alsobrooks, crossing party lines to vote in favor, allowing the bill to move to the next stage, where it still needs to be merged with the version from the Agricultural Committee before being sent to the full chamber.

After the news broke, the cryptocurrency market reacted with a surge. Bitcoin climbed to $81,500, up about 3%, Coinbase's stock price soared over 8% during the session, Strategy rose 7%, Galaxy Digital increased by more than 6%, and Stable Circle, which had previously dropped 6%, also turned around. On the same day, the S&P 500 index first breached 7,500 points, but cryptocurrency stocks significantly outperformed the broader market.

Core of the Bill: Ending the Jurisdictional Dispute Between SEC and CFTC

The CLARITY Act is seen as the most important legislative goal for the cryptocurrency industry in Washington. Its core purpose is to terminate the long-standing ambiguity in the jurisdiction over digital assets between the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), a gray area that has plagued the cryptocurrency industry without clear regulatory guidance for years.

Specifically, the bill will clarify which digital assets are classified as commodities and which as securities, and regulate the obligations of 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 designated as a money transmitter, one typically must bear obligations related to FinCEN registration, anti-money laundering, transaction records, and suspicious activity reporting, with some businesses possibly subject to state-level licensing. The controversy lies in the fact that non-custodial software developers do not actually hold or control user funds, yet they could be drawn into the responsibilities of money transmitters in certain cases. The role of the CLARITY Act is to distinguish between centralized financial intermediaries and developers that solely provide code, thereby delineating clearer legal boundaries for non-custodial activities.

Asheesh Birla, CEO of Evernorth, stated: “For years, U.S. blockchain entrepreneurs have been operating in a regulatory purgatory. Regulatory clarity can stimulate capital flow; those institutions that have been observing this space are now one step closer to a framework they can act upon.” Mari Tomunen, Chief Legal Officer of DoubleZero, pointed out the pain points in the non-custodial space: “Existing guidelines indicate that non-custodial activities should in principle not pose legal risks of money transmission, but certain litigation theories and court rulings point in the opposite direction. The CLARITY Act will help establish clearer statutory lines for decentralized and non-custodial activities.”

Cathy Yoon, General Counsel of Harmonic, expressed that this legislation symbolizes a shift in Congressional attitude: “Moving from deliberation to a full Senate vote symbolizes an increasing recognition that not every participant in cryptocurrency plays the role of financial intermediary. Thoughtful legislation can frame rules for custodians and centralized participants while keeping space for validators, open networks, and software developers.”

Dramatic Last-Minute Turnaround

However, the review process was not without its challenges. The entire morning was shrouded in a climate of bipartisan confrontation, with both sides fiercely debating various amendments. The turning point occurred while the legislators were still debating, as Republican Chair Tim Scott agreed to incorporate several amendments he had previously rejected to garner support from some Democratic lawmakers. These additional amendments covered three main areas: enhancing investor protection, clarifying what banking-related activities can be conducted regarding cryptocurrency, and defining what constitutes a “truly decentralized” DeFi project.

The last item has been a long-standing issue promoted by Democratic Senator Mark Warner, who advocates for stricter protective mechanisms for DeFi. It is noteworthy that these additional amendments have garnered rare bipartisan support, in stark contrast to earlier amendments that were split along party lines.

Democratic Senator Elizabeth Warren, however, strongly protested the procedure, criticizing these amendments as merely “inadequate compromises,” casting a dissenting vote, and declaring that the bill “is not yet ready,” insisting that the Senate has priorities other than cryptocurrency legislation to address.

After the bill passed, Scott told the committee members: “This has been one of the most enlightening and challenging processes I have experienced since becoming a U.S. senator. The hours each of you spent in dialogue and understanding each other are incredible.” He expressed confidence that the two parties will continue to work together to resolve remaining issues.

It is noteworthy that the defection of Senators Ruben Gallego and Angela Alsobrooks was key to the passage of today's bill. Both were deeply involved in the bipartisan negotiation process for the legislation.

However, they also made it clear that committee voting does not equate to support from the full chamber. Alsobrooks emphasized: “My vote today is a vote for continuing good faith negotiations; we have much work to do.” She stated explicitly that she would not sustain this support during the full Senate vote if existing concerns are not addressed. Gallego also indicated that his final vote would depend on subsequent developments.

These statements also foreshadow the true challenges that lie ahead for the bill.

Two Major Hurdles: Ethical Clause and 60-Vote Threshold

Although the bill successfully passed today, it faces significant hurdles before being sent to President Trump for signature.

The first hurdle is the conflict of interest clause for government officials. The Democrats have set this clause as a condition for supporting a full Senate vote, requiring limits on the financial ties between senior government officials and cryptocurrency companies. However, this clause was not included in the current review. Democratic Senator Kirsten Gillibrand has repeatedly made it clear that without this clause, the bill cannot obtain the required 60 votes for passage in the full Senate.

The White House has taken a firm stance on this issue. White House advisor Patrick Witt stated earlier this month at the Consensus Miami 2026 conference that any clause “specifically targeting the president” will not be accepted. Furthermore, Trump and his family are deeply involved in the cryptocurrency industry, making this issue particularly sensitive and greatly limiting the space for compromise between the two parties.

The second hurdle is the 60-vote threshold in the Senate. Currently, the Republicans hold only 53 seats in the Senate, meaning at least 7 Democratic senators are needed for support. However, these votes are precisely tied to the ethical clause that Republicans resist, creating a legislative stalemate.

Regarding this deadlock, Cody Carbone, director of the lobbying group Digital Chamber, analyzed to CoinDesk that a bipartisan deal on the ethical clause is likely to be reached before the bill is scheduled for a full Senate agenda. He explained: “They will only bring the bill to the floor for a vote when they are confident they have the necessary 60 votes.” In simple terms, the majority leader of the Senate will not risk placing a potentially failing bill on the agenda, as this is a basic political game rule.

Therefore, the industry generally anticipates that the final version of the ethical clause will be agreed upon in behind-the-scenes negotiations before the bill truly reaches the floor, ensuring that all key controversies will have been resolved by the time it comes to a vote. Carbone further pointed out that the entire process must be completed before the Congressional recess in August; otherwise, the bill risks missing this year’s legislative window. This timeline aligns with Democratic Senator Kirsten Gillibrand's recent assessment, who similarly believes that if progress is not made before the summer recess, the chances of the bill passing this year will be significantly reduced.

Additionally, the bill must also address concerns of financial crime.. Beyond the ethical clause, some Democratic lawmakers still express concerns about whether the bill can effectively prevent cryptocurrency and DeFi technologies from being used for financial crimes. Law enforcement-related provisions are also one of the key issues that must be resolved in subsequent negotiations; otherwise, it will be challenging to garner sufficient Democratic support.

Traditional Finance's Last-Minute Counterattack Fails

Additionally, a week before the vote, the U.S. banking industry mobilized fully against the CLARITY Act. The American Bankers Association (ABA) sent over 8,000 letters to Senate offices, warning that the “stablecoin yield” provision in the bill could lead to massive withdrawals of deposits from traditional banks to the cryptocurrency industry.

The final version of the bill adopted a compromise reached earlier this year in May between Senator Thom Tillis (Republican) and Senator Angela Alsobrooks (Democrat): it prohibits stablecoin companies from paying interest similar to savings accounts (meaning users can earn interest simply by holding funds), but allows “usage-based” rewards (for example, rewards can be earned when users conduct transactions, transfers, or staking activities).

This scheme saw Circle's stock soar nearly 20% on the day it was announced on May 4, reflecting the market's positive reaction to the outcome. The banking industry views this compromise as overly favorable to stablecoin companies. Traditional banks are concerned that even if passive interest is banned, the gray area of “usage-based rewards” is still likely to attract significant outflows of deposits, especially among younger generations and tech-savvy users.

Bank of America analyst Ebrahim H. Poonawala noted in a report earlier in May that, while he considers the overall scheme “net positive” for the banking industry, alleviating regulatory uncertainty, the ABA clearly disagrees with this optimistic assessment, leading to their large-scale mobilization before the vote.

From today’s vote results and market response, it appears the banking industry's last-minute lobbying effort did not succeed. The bill passed smoothly with a 15-9 vote, and the stablecoin-related provisions remained as initially proposed, causing Circle's stock to turn from negative to positive on the day of the vote, reflecting that the market believes the stablecoin industry has maintained its critical stronghold in this legislative struggle.

Miss August 2023, Wait Until 2030

The cryptocurrency industry has certainly expressed high approval of today’s vote. Summer Mersinger, executive director of the Blockchain Association, referred to it as a “decisive moment,” stating in a statement: “Digital asset policy must be built on a bipartisan foundation; today’s vote reflects a growing bipartisan recognition that the U.S. needs clear rules of the game.” She also noted that the bill will assist consumers in obtaining compliant and innovative financial products, benefiting consumers and reducing U.S. users' dependence on offshore platforms.

However, the ensuing process for the bill is quite complex. First, the version passed by the Banking Committee must be merged with the version passed by the Senate Agriculture Committee earlier this year along Republican lines. The consolidated bill will then be sent to a full Senate vote, needing 60 votes to pass.

After passage, the bill must also be re-voted by the House of Representatives. The House already passed a similar version with a substantial margin of 294 to 134 in July 2025, therefore the support from the House is relatively secure. If the final versions from both chambers are consistent and the legislation is completed, the SEC, CFTC, and the Treasury Department will be authorized to begin drafting implementation details.

It is estimated that the entire rule-making process will extend to 2027, with most compliance deadlines expected to fall between 2027 and 2028. In other words, even if the bill passes through Congress smoothly this summer, it may still take until 2027 or later for the cryptocurrency industry to operate under the new regulatory framework.

Additionally, there is another time pressure: if this chance is missed in August, it may not come again until 2030.

Whether it can “successfully pass Congress” itself is an unknown, as there is little time left in the Senate’s agenda, with the summer recess and midterm elections looming, creating immense time pressure for the bill's advancement. Republican senators Cynthia Lummis and Bernie Moreno have publicly warned that if the bill does not advance before the August recess, the next viable legislative window may not open until 2030, implying that if this summer's opportunity is missed, the cryptocurrency industry might have to wait several more years for substantial legislative progress.

Perhaps for U.S. cryptocurrency operators trapped in “regulatory purgatory” for years, today’s 15 to 9 vote becomes the most critical milestone on this long legislative journey, but what lies ahead is still a hard battle against time.

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