Senate Banking Committee to vote on Clarity Act Thursday

The Senate Banking Committee will vote Thursday on the Clarity Act, a bill that would formally authorize many crypto activities in the United States. Lawmakers remain divided over limits on stablecoin rewards, ethics rules for public officials’ crypto ventures and legal protections for developers of decentralized finance software.

The debate over stablecoin yield centers on whether crypto firms may offer interest or rewards on dollar-pegged stablecoins. Banking trade groups want language in the bill that would ban or tightly restrict those programs, arguing they could draw deposits away from traditional savings accounts. Crypto firms contend prior stablecoin legislation addressed yield and that customers should keep access to such products. One major exchange withdrew support from earlier versions of the bill amid concern yield limits would be added.

Senators Thom Tillis and Angela Alsobrooks proposed a compromise that restricts stablecoin rewards in some cases while allowing them in others. Bank groups criticized the compromise and the American Bankers Association urged member banks to press their senators, warning committee members may not fully appreciate risks tied to a stablecoin loophole.

Ethics provisions are the second unsettled issue. Some Democrats seek explicit limits preventing public officials from launching or promoting personal crypto ventures while in office. The White House has opposed language that would single out the former president’s businesses, and Senate Banking Chairman Tim Scott has argued ethics language is outside the committee’s jurisdiction and should be handled on the Senate floor.

Pro-crypto Democrats on the committee have threatened to withhold support if ethics language is barred at markup. A former committee staffer and consumer advocate called efforts to block ethics language a tactic to avoid a high-stakes fight. Insiders say moving the ethics debate to the floor could preserve bipartisan support during committee markup, while a party-line committee vote would complicate efforts to secure the seven Democratic votes sponsors need to pass the full Senate.

The third dispute involves the Blockchain Regulatory Certainty Act, which was attached to the Clarity Act and would narrow criminal exposure for some developers of crypto software, including privacy tools, under money-transmission laws. The Department of Justice has won recent convictions against several developers, prompting civil liberties and tech advocates to press for clearer criminal intent standards.

Senator Cynthia Lummis reached a deal with Senator Chuck Grassley to add language clarifying the intent required for illegal money-transmission charges. The clarification drew support from developers and advocates who had sought greater legal certainty; some national-security focused senators had raised concerns the exemptions could hinder enforcement.

If the Banking Committee approves the Clarity Act on a party-line vote, the bill could still move to the Senate floor but face a tougher path to final passage. Sponsors need at least seven Democratic votes to clear the full Senate. With Congress slowing ahead of the midterm elections, Wednesday’s markup is a narrow window to advance the legislation.

Industry representatives say they are more optimistic than in recent months about clearing the committee, but unresolved fights over stablecoin yields, ethics restrictions and DeFi protections will shape how the bill fares in the coming days.