Advocates for the "Clarity Act" seized a legislative window in May to achieve a breakthrough. If it withstands scrutiny over the next two months, the United States could pass its first law establishing a regulatory framework for all types of cryptocurrencies.
After more than five weeks of negotiations and political maneuvering, U.S. cryptocurrency legislation has seen another breakthrough, with a crucial vote completed before Congress's recess. This development suggests that by 2026, the U.S. could potentially establish a clear federal regulatory framework for all types of digital assets.
In the final week of May, the U.S. Congress entered a recess lasting until early June. Just prior, the Senate Committee on Banking, Housing, and Urban Affairs (the "Senate Banking Committee") unexpectedly held a key markup hearing on the Digital Asset Market Structure Clarity Act (the "Clarity Act") and passed a procedural vote with a 15-9 tally.
The version of the Clarity Act used for this vote contained numerous revisions from the initial draft several months prior, expanding from 278 to 309 pages. It also included adjustments addressing key concerns such as stablecoin yields.
This critical step makes it possible for the Clarity Act to be passed and enacted into law before Congress's summer recess in August.
This vote outcome continues the legislative momentum from last year. On July 18, 2025, U.S. President Trump signed the Guiding and Establishing National Innovation for U.S. Stablecoins Act (the "GENIUS Act") into law. That act established federal rules for the issuance and operation of dollar-pegged payment stablecoins. On the same day, the Clarity Act passed the House of Representatives and was transmitted to the Senate for the next stage of the legislative process.
Unlike the GENIUS Act, which only addressed payment stablecoins, the Clarity Act encompasses all blockchain-related digital assets. It also shifts primary regulatory authority for cryptocurrencies other than stablecoins to the Commodity Futures Trading Commission (CFTC), a smaller agency with fewer enforcement resources. This means that if passed, the Clarity Act would fundamentally reverse the stringent regulatory posture towards cryptocurrencies established by the Biden administration.
Legalizing Stablecoin Holder Profits?
The primary goal of the Clarity Act is to clearly define which cryptocurrencies are securities and which are commodities, thereby clarifying whether the primary regulator is the U.S. Securities and Exchange Commission (SEC) or the CFTC.
However, the most impactful revision in this latest version concerns stablecoin yields. The version of the Clarity Act passed by the Senate Banking Committee addresses and adjusts the question of whether stablecoin holders should be paid yields.
"Stablecoin yields" were initially considered a secondary issue in the Clarity Act, but since January 2026, banking groups and the cryptocurrency industry have been fiercely debating the topic. This is a legacy issue from the GENIUS Act, which explicitly prohibited stablecoin issuers from paying direct interest or yields and defined stablecoins as "payment stablecoins" similar to traditional currency. However, many cryptocurrency platforms found ways to circumvent these rules by offering rewards tied to payment activities involving stablecoins, sparking discontent from the banking sector.
On April 8, the U.S. administration intervened, siding with the cryptocurrency industry. The White House Council of Economic Advisers (CEA) released a report stating that prohibiting interest and yield payments to stablecoin holders would do little to substantially boost bank lending and would instead harm consumer interests.
Subsequently, on April 13, the American Bankers Association (ABA) countered, arguing that current policy should focus on whether allowing payment stablecoins to generate yields would incentivize deposits to flow out of banks—particularly from relatively weaker community banks—and into stablecoins. Since then, bankers have continued lobbying lawmakers and applying pressure to limit the scope of stablecoin rewards.
The lobbying efforts of the U.S. cryptocurrency industry, however, proved more effective. On April 25, as the May legislative window was about to open, President Trump stated at a private event for high-profile cryptocurrency figures at Mar-a-Lago that he would not allow the banking industry to derail the long-delayed Clarity Act.
From its early drafts to the latest version, the Clarity Act has consistently maintained a supportive stance towards the cryptocurrency industry: it allows rewards for peer-to-peer payment activity while restricting passive yields on stablecoin balances, aiming to both protect traditional bank deposits and foster innovation.
Although the latest version of the bill considers the banking sector's concerns with slightly stricter wording, it still preserves significant leeway for "rewards based on payment activity." It includes a non-exhaustive list of permissible reward activities: transactions, payments, transfers, conversions, remittances, settlement activities (including rebates), market-making liquidity provision, transaction-related collateral, placing assets under credit or investment risk, governance voting, validation, staking, and the use of products or services, including participation in loyalty, promotional, subscription, or incentive programs.
Furthermore, the bill allows these rewards to "be calculated based on balance, length of holding, holding period, or any combination of the foregoing." Alex Thorn, Head of Research at Galaxy, believes this clause is highly significant for the cryptocurrency industry. It means that rewards calculated based on balance or holding period are not inherently prohibited, as long as the underlying activity is genuine and the arrangement is not economically equivalent to a deposit.
A research report published by Galaxy around the same time noted that if the Clarity Act becomes law, it is expected to attract trillions of dollars in foreign capital into the U.S. financial system, sufficient to offset any impact on U.S. bank deposits from stablecoins.
The latest version of the bill also requires the Federal Reserve, the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), and the Treasury Department to submit a joint report within two years. This report must analyze the global adoption of stablecoins, their impact on U.S. Treasury yields and demand across different maturities, their effect on the U.S. dollar's role in global foreign exchange transactions and reserves, the cost of payments using stablecoins, and the impact of non-dollar stablecoins and foreign central bank digital currencies (CBDCs) on dollar dominance. In contrast, a version from January only required the Fed, OCC, and FDIC to submit a report on deposit outflows from banks.
Alex Thorn suggests this indicates the Senate Banking Committee views stablecoins as a significant factor affecting demand for U.S. Treasuries and dollar dominance, not merely as a deposit outflow issue.
Protection for Cryptocurrency Platform Developers?
The cryptocurrency industry finds further encouragement in the potential removal of criminal prosecution risks for some practitioners.
The latest version of the Clarity Act stipulates that software developers who create blockchain protocols or smart contracts and cannot exercise unilateral control over user funds are not considered money transmitters. They would not need to register under the U.S. Bank Secrecy Act and would not face prosecution as unregistered broker-dealers.
This development reminds many industry participants of Tornado Cash, a company founded in 2019. It developed a cryptocurrency mixer operating on the Ethereum blockchain, using mixing technology to combine funds from different senders, thereby achieving anonymous transactions.
On August 24, 2023, the U.S. Department of Justice charged Tornado Cash founders Roman Storm and Roman Semenov with conspiracy to operate an unlicensed money-transmitting business and violations related to money laundering and sanctions, with potential sentences of at least 20 years. Subsequently, in May 2024, Tornado Cash co-founder Alexey Pertsev was sentenced in the Netherlands to over five years in prison for laundering $2.2 billion through the cryptocurrency mixer platform.
These two criminal cases drew widespread attention to DeFi (decentralized finance), with many in the industry viewing them as a watershed moment for imposing strict regulation on Web3 smart contract developers. From the perspective of the cryptocurrency industry, holding Tornado Cash's founders responsible for users is unjust, as those users are designed to be anonymous and independent. Following these events, some U.S. DeFi projects, concerned about prosecution risks, relocated their development entities from the U.S. to countries and regions with more lenient regulations.
In response, the Senate Banking Committee explained that the Clarity Act would target illegal activity while protecting legitimate software development and innovation. The bill explicitly protects software developers who publish, maintain, or contribute code without controlling customer funds.
However, the Clarity Act also clarifies sanctions obligations, requiring centralized digital asset intermediaries interacting with DeFi protocols to implement risk management standards. It establishes corresponding rules for intermediaries that are not truly decentralized. The bill also mandates focused studies and reports on cryptocurrency mixers and tumblers, illicit finance risks, cybersecurity vulnerabilities, and national security threats, and authorizes increased funding for the Financial Crimes Enforcement Network (FinCEN).
Trump Applies Pressure Again, But Obstacles Remain for Passage
Since March 2025, President Trump has been urging Congress to pass the GENIUS Act before its August recess that year, ultimately succeeding. In late April 2026, Trump began pushing for progress on the Clarity Act. But can he succeed again?
The enactment of a new U.S. law often involves prolonged political struggle, requiring multiple rounds of negotiation and compromise during the review process in both the House and Senate. Laws with stronger bipartisan consensus are easier to pass. In the previous year's legislative process, Trump demonstrated significant influence over Republican lawmakers, who almost universally supported the passage of the GENIUS Act.
However, some analysts believe replicating the GENIUS Act's success with the Clarity Act may prove difficult.
The deep involvement of the Trump family in the cryptocurrency sector raises ethical concerns, prompting several Democratic lawmakers to push for the inclusion of an "ethics clause" in the Clarity Act. This clause would prohibit or restrict high-level U.S. officials from trading cryptocurrencies. Although the "ethics clause" was not part of the recent vote, it could be incorporated into subsequent legislative procedures.
Clearly, the Trump administration rejects any "ethics clause" that could restrict the cryptocurrency activities of Trump himself or his family. This controversy could become a stumbling block for advancing the bill.
More importantly, Trump has recently been embroiled in a series of events affecting his political reputation, including disputes between his family and the Internal Revenue Service, which could diminish his political influence over Republican lawmakers.
Nevertheless, the lobbying power of the cryptocurrency industry in the U.S. should not be underestimated.
During the 2024 U.S. presidential election, the cryptocurrency industry raised over $245 million in campaign funds. According to media reports, the industry plans similar actions for the 2026 U.S. midterm elections.
In early May, White House Digital Asset Advisor Patrick Witt publicly stated that the Trump administration plans to push for the Clarity Act to pass Congress by July 4.
In the United States, a bill must pass both the House of Representatives and the Senate and be signed by the President to become law. Whether the Clarity Act ultimately becomes law remains uncertain. As of the congressional recess, the bill had not yet entered the full Senate voting process.
Some analysts point to two major challenges. On one hand, in the next Senate vote, if the bill cannot secure the support of 60 out of 100 senators, it could be subjected to a filibuster, increasing the difficulty and unpredictability of passage. On the other hand, as mentioned, the diminished political influence of Trump, who has been a key driver of cryptocurrency legislation, introduces further uncertainty.
Key market indicators also reflect the uncertain expectations for the bill's passage. Following the Senate Banking Committee's vote to advance the Clarity Act, the price of Bitcoin briefly touched $82,000 before quickly retreating to around $77,000.
By May 23rd, cryptocurrencies experienced a collective sharp decline. Within 24 hours, Bitcoin fell nearly 3%, dropping below $76,000, while Ethereum and Dogecoin fell over 3%.