Key Takeaways
- Senator Thom Tillis is requesting the Senate Banking Committee postpone the CLARITY Act markup until May
- The central controversy involves how stablecoin rewards and yield should be regulated under the proposed legislation
- Traditional banking institutions worry that stablecoin yield offerings could drain deposits from conventional banks
- The Digital Chamber, a crypto advocacy organization, is demanding immediate progress on the legislation
- Senator Moreno has cautioned that failure to pass the bill by May could derail crypto legislation for years
The Senate’s highly anticipated crypto market structure legislation, the CLARITY Act, is experiencing yet another setback. North Carolina Republican Senator Thom Tillis informed journalists on Monday that he does not anticipate the Senate Banking Committee will conduct a markup session for the bill during April. Instead, Tillis has formally requested Committee Chairman Tim Scott to push the timeline to May.
As a primary negotiator in the discussions, Tillis has been instrumental in attempting to reconcile competing interests between traditional banking institutions and the cryptocurrency sector. Speaking to reporters, he emphasized the necessity of allowing adequate time for all stakeholders to voice their concerns before advancing the legislation.
The legislation successfully passed the House of Representatives with broad bipartisan backing nearly twelve months ago. While it has since secured approval from the Senate Agriculture Committee, it must still navigate the Senate Banking Committee before proceeding to a complete Senate floor vote.
Contention Over Stablecoin Rewards
The primary obstacle preventing progress centers on how stablecoin rewards should be handled. Traditional banking interests have expressed serious apprehension that permitting stablecoin issuers or crypto platforms to offer yield to token holders could trigger significant deposit withdrawals from conventional banking institutions, particularly affecting smaller community banks.
The banking sector contends that many smaller financial institutions lack the capital reserves and operational flexibility necessary to weather substantial deposit outflows without facing serious financial strain.
Conversely, cryptocurrency companies, including Coinbase, have advocated vigorously for more accommodating provisions regarding stablecoin rewards. These firms maintain that overly restrictive regulations on rewards would stifle innovation and competitiveness in the digital asset space.
According to the most recent draft language from last week, the legislation would prohibit rewards on dormant stablecoin holdings while permitting yield generation connected to active use cases such as transaction facilitation. An insider informed The Block that modifying the current text would prove extremely challenging at this advanced stage.
Senators Tillis and Maryland Democrat Angela Alsobrooks have been collaborating closely to find common ground on this contentious matter.
Mounting Pressure from Industry
The Digital Chamber, a prominent cryptocurrency advocacy organization, dispatched a letter on Monday to members of the Senate Banking Committee, pressing them to move the legislation toward a markup session “as soon as the calendar allows.”
CEO Cody Carbone signed the correspondence, which was directed to both Tim Scott and Elizabeth Warren, the committee’s ranking Republican and Democratic leaders, respectively.
“More than 70 million Americans who have embraced digital assets deserve the regulatory clarity they have waited far too long for,” said Taylor Barr, the group’s government affairs director.
The Digital Chamber emphasized that more than 270 days have elapsed since the House approved the legislation.
US Treasury Secretary Scott Bessent has also been exerting influence on the process. During March, he issued a stark warning that if Democrats were to capture control of the House in November’s midterm elections, the probability of passing comprehensive crypto legislation could collapse entirely.
Senator Bernie Moreno previously warned at the DC Blockchain Summit that if the bill did not pass by May, “digital asset legislation will not pass for the foreseeable future.”
This week, the Senate Banking Committee’s immediate focus will shift to Tuesday’s confirmation proceedings for Kevin Warsh, President Trump’s selection for Federal Reserve Chair.
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