- The Clarity Act remains stuck in limbo as big banks and crypto-natives continue hardline negotiations over its provisions.
- Their main points of contention center on stablecoin yields, the SEC’s potential overreach, government surveillance, and anti-competition restrictions.
The United States of America, home of the world’s largest equity markets, remains the main battleground of international finance. It has also become central to the narratives shaping the cryptocurrency sector.
One of the hottest discussions heavily affecting sentiment in the crypto market is the pending Clarity Act. The bipartisan bill has yet to be elevated for markup in the Senate, but parties at the Committee-level negotiations table have been in a heated debate around its provisions. Big banks and powerhouses from the crypto sector have strongly lobbied to secure as much protection as possible for their respective industries under the proposed legislation, leading to deadlocks and delays in advancing it to the Congress’s upper chamber.
The rift dividing the banking and crypto sectors on the subject has gone so far that even the White House has stepped in to mediate, pressing the parties to arrive at a compromise to get the ball rolling. US President Donald Trump’s administration initially gave the opposing sides a March 1 ultimatum, hoping for its passage before spring ends.
With the missed deadline and no sign of backing down from either camp, people are now doubting whether the bill will even reach the Senate floor by April.
What is the Clarity Act
The Clarity Act is formally known as the “Digital Asset Market Clarity Act of 2025” under H.R. 3633. The bill passed the House of Representatives in July 2025 by a vote of 294-134. However, it hit a wall on its path to the Senate as big banks and crypto entities questioned some of its key provisions.
The legislation stemmed from the blockchain and crypto industry’s need for clear rules and a taxonomy of digital assets, following the Biden administration’s regulation-by-enforcement approach led by former US Securities and Exchange Commission (SEC) chair Gary Gensler. Back then, members of the sector cried foul over the government’s prioritization of filing lawsuits to force aggrieved parties into compliance over guidelines that weren’t clear to them in the first place.
The GENIUS Act marked a turnaround in the legislative landscape, shifting the focus from purely punitive measures to a structured framework for innovation, particularly for stablecoin issuances. The Clarity Act was a major follow-up to the bill, plugging the regulatory gaps it left behind. It particularly draws a boundary around the longstanding dispute over where digital assets fall in the securities-versus-commodities debate.
What the Bill Aims to Accomplish
According to the primer released by the US Senate Committee on Banking, Housing, and Urban Affairs, the Clarity Act sets clear, enforceable guardrails to update the fragmented oversight of regulators under outdated rules but without undermining the foundational principles. It protects Main Street, encourages investment and innovation in the US, and establishes safeguards for national security.
The Clarity Act’s key provisions cover the following elements:
1. Categorization of Digital Assets
The framework differentiates digital asset securities and digital asset commodities. The former are essentially assets sold or transferred under an investment contract, especially during capital fundraising or initial coin offerings (ICOs). The latter are decentralized assets whose value is linked to the functionality, operation, or services of a blockchain system.
2. Regulatory Boundaries
The bill expands the Commodity Futures Trading Commission’s (CFTC) authority to include decentralized digital assets, exchanges, brokers, and dealers. The act thereby amends the related provisions within the Securities Exchange Act of 1934 and the Commodity Exchange Act. However, those that operate across both the securities and commodities markets must comply with the joint rules of the Securities and Exchange Commission (SEC) and the CFTC.
3. DeFi Protections
The act exempts decentralized processes, such as validating and running nodes, as well as other activities that do not directly control customer funds. On the other hand, centralized entities or intermediaries that interact with DeFi protocols or have access to customer funds must adhere to the strict risk management, cybersecurity, anti-fraud, and other compliance standards tied to the bill’s custodial safety mandate.
4. Disclosure and Capital Raise Rules
The bill establishes disclosure standards scaled to the risks of digital commodities. Additionally, it offers less stringent requirements for their capital raises than traditional equity issuances.
5. CBDC Ban
The act doubles down on the ban of central bank digital currency (CBDC). It prohibits the Federal Reserve from issuing any form of digital currency that could introduce surveillance and controls over how people use their money.
Issues Raised on the Table
The clash between the traditional banking and crypto sectors only intensified as both have engaged in serious lobbying efforts over certain issues. These include the following factors:
1. Stablecoin Yields
The thorniest discussion between Clarity Act supporters and critics centered on stablecoin yields. The banking sector warned that allowing rewards for merely holding stablecoins will catalyze a deposit flight, with Bank of America (BoA) warning that it could drain up to $6 trillion from the banking system.
The banking sector argued that deposits are necessary to provide liquidity to lenders. Hence, it wanted the law to explicitly ban any form of stablecoin rewards, including those offered by third-party exchanges, to totally prevent companies from skirting around the restriction.
The crypto side claimed that yields have been the primary feature of stablecoins. Its representatives pointed out that such features have been in place over the years, but it’s only now that banks are raising the alarm of a potentially massive deposit flight.
2. Default Security Classification of Tokenized Equities
Banks contended that many real-world asset (RWA) tokens are merely digital wrappers for traditional securities. Thus, regulators must classify them as securities from the get-go.
Blockchain advocates defended that tokenization only enhances the utility and liquidity of the underlying asset and does not create a new speculative vehicle. They strongly opposed the legislation’s default classification of all newly created digital assets as securities, unless the SEC proves otherwise within a strict 60-day review period.
3. Government Surveillance
Banks wanted regulators to exercise the same level of scrutiny over businesses that provide services for digital assets. Key personalities opposed unrestricted government access to financial records of industry participants under the guise of anti-money laundering (AML) compliance.
Many considered such a measure to be no different from the surveillance and control mechanisms inherent in CBDCs.
4. SEC’s Subversion of the CFTC
The security-by-default classification of new digital assets effectively claws back authority to the SEC. Moreover, the bill grants the SEC the authority to intervene if a hybrid asset displays even a marginal characteristic of an investment contract.
Crypto advocates commented that the mentioned dynamics could offset the CFTC’s expanded scope, so they are seeking exclusionary rules to clarify the matter. The SEC and CFTC’s newly forged Memorandum of Understanding (MOU) to harmonize their coordination and collaboration could be the key to balancing the power between the two regulators and preventing their potential overreach.
5. Anti-Competition Clauses
Crypto-native firms stated that a strict ban on stablecoin yields and other overly restrictive features of the bill will curtail or drive away innovations in the digital asset space. They argued that the prohibitive clauses will allow traditional banks to maintain their monopoly over consumers’ savings and prevent people from choosing options that offer better returns.
Furthermore, the public urged banks to offer more competitive returns on customers’ deposits, rather than outright blocking competition from stablecoin yields.
Final Thoughts
The unresolved issues between the banking and crypto sectors are expected to delay the markup of the Clarity Act further. These are exacerbated by the Trump administration’s shift in priorities to other, more pressing concerns in the economy and on the world stage amid the Middle Eastern conflict, and by its focus on the SAVE America Act, a voting reform bill, as midterm polls close in.
