Clarity Bill Draft Released in April: A Key Turning Point for the U.S. Digital Asset Regulatory Framework

Long-standing U.S. oversight of digital assets has been in an awkward state of “regulating through enforcement.” Before the CLARITY Act was born, a jurisdictional battle between the SEC and the CFTC created acute uncertainty for the industry: states legislated on their own terms, two major federal agencies fought for leverage against each other, and project teams only learned—right after receiving subpoenas—that their tokens had been characterized as unregistered securities. Just looking at the Ripple case, this litigation lasted more than three years, directly affecting fluctuations in the XRP market value at the level of hundreds of billions of dollars, becoming a lingering shadow over the entire industry.

In July 2025, the House passed the CLARITY Act with a bipartisan advantage of 294 to 134, far exceeding expectations and sending a clear signal: both parties in Congress had strong political will to establish a framework of certainty for digital assets. However, once the bill moved to the Senate, the legislative process quickly stalled. The committee review originally scheduled for January 15, 2026 was urgently postponed due to strong industry opposition. In late March, Senators Thom Tillis and Angela Alsobrooks announced a broad, principle-based compromise on the core dispute, and the White House immediately stepped in to coordinate, locking the review timetable to mid-April. This string of setbacks is itself a true footnote to structural change: making regulation clear is not merely a matter of legislative technique, but a contest between old and new financial orders.

A threefold reshaping of jurisdictional boundaries, asset classification, and the earnings ban

The CLARITY Act’s core mechanisms revolve around three main lines. First, it ends the “turf war” between the SEC and the CFTC. The CFTC receives exclusive jurisdiction over digital commodity spot markets, covering sufficiently decentralized tokens such as Bitcoin and Ethereum; the SEC retains regulatory authority over assets with the functional features of investment contracts. Second, it establishes predictable standards for asset classification. Unlike FIT21, CLARITY abandons the complex “decentralization test” and instead adopts a clearer classification framework. Third—and the most controversial—an earnings ban for stablecoin holders. The draft prohibits digital asset service providers from providing any direct or indirect yield on stablecoin balances, or any arrangement that is “economically or functionally equivalent to bank interest.” Rewards based on activity (such as loyalty programs or payment incentives) remain within the allowed scope, but the SEC, CFTC, and the Treasury must define what reward types are permissible within twelve months after the bill takes effect. In addition, the bill provides a clear safe harbor for DeFi activities, excluding protocol developers and non-custodial services from the definition of financial intermediaries.

The structural trade-offs between regulatory clarity and innovation flexibility

The deepest cost of the bill is not in the provisions themselves, but in the shift in power it reflects. Bank-industry lobbying groups argue that yield-bearing stablecoins would create unfair competition with bank deposits, potentially triggering monthly deposit outflows exceeding $20 billion and threatening financial stability. Treasury research has even estimated that, if yield is allowed, up to $6.6 trillion in funds could be shifted from bank deposits to stablecoin products at most. As a result, stablecoins are reclassified from yield-bearing assets to purely payment and settlement tools.

The cost of this trade-off is structural. An annual revenue scale of about $1.35 billion is directly affected as a result. The industry’s early reaction is broadly cautious, with many believing that tying rewards to balances or trading amounts would make it extraordinarily difficult to design workable incentive architectures. Industry participants are also concerned that the draft’s restrictions on RWA may explicitly exclude these assets from digital commodities, subjecting them to extremely strict securities-law regulation. The cost of regulation is exactly here: clarity comes with a price, and that price is paid by the industry.

The polarizing impact on the DeFi ecosystem and compliance fragmentation

The bill’s impact on the crypto industry shows a clear pattern of divergence. Under the stablecoin earnings ban, DeFi protocols face significant headwinds. Research organizations warn that the earnings ban would effectively re-concentrate financial yields into traditional banks and regulated money market funds, weakening DeFi platforms’ core value proposition. Lending and trading protocols such as Aave and Uniswap could face stricter operational constraints, reduced trading volumes, and diminished demand for governance tokens.

But the bill also offers structural benefits to DeFi. By clearly excluding protocol developers and non-custodial services from the definition of financial intermediaries, CLARITY provides a legal safe harbor. This means truly decentralized protocols gain legal certainty, while centralized intermediaries face the most direct compliance pressure. The bill also provides clear protection for activities such as custodial front-end interfaces, running nodes, and publishing open-source code. Meanwhile, clearer CFTC regulatory frameworks will offer institutional assurance for compliant digital-commodity exchanges; in the long run, it may attract more institutional capital into spot markets. The distribution of compliance dividends is highly likely to cause deep internal segmentation within the industry.

Three scenario paths after passage of the legislation

Looking ahead to the bill’s future, three realistic paths can be sketched out. First, prioritize implementing the framework and accept a compromise on the earnings issue. Lawmakers advance the bill in its current form; even if it tightens earnings limits in the short term, it buys regulatory certainty for the whole industry. Under this path, stablecoins continue expanding as infrastructure, but the upside for earnings is sharply constrained. Second, narrow the boundaries of the earnings provisions. Through continued negotiation, a more precise definition of “economic equivalence” would leave room for compliant yield-bearing products. Third, the bill stalls and returns the system to regulatory chaos. If the Senate cannot clear the 60-vote threshold before the midterm elections, legislation would be delayed until 2027 or even longer, and the market would again fall back into an enforcement-led state of confusion. Based on recent information, the Senate Banking Committee’s review is scheduled for the second half of April, and lawmakers are intentionally compressing the timeline to provide the industry with a legal framework before the midterm elections. In the political cycle leading up to the midterms, April through July is the key window for advancing the bill.

Three major structural risks for the bill’s outlook before passage

Advancing the bill faces multiple uncertainties. On the political front, some public commentary argues the bill is “effectively destined to fail,” and the Senate’s procedural threshold of 60 votes is almost impossible to cross under the current political landscape. A Washington policy research institution estimates this year’s passage probability at only one-third. On the execution front, industry participants warn that even if the bill passes, it could still take up to 15 years for rulemaking and implementation, and it may be “weaponized” by future administrations. On the market front, after disclosures related to the earnings provisions, one stablecoin issuer’s stock price reportedly plunged nearly 20% in a single day; forecasts show the likelihood of the bill passing in 2026 falling from 67% to 62%, with confidence eroding. The bill’s fate depends not only on the text itself, but more on Congress’s political will.

Summary

The release of the CLARITY Act draft marks a critical step in moving U.S. digital asset regulation from chaos toward rule-based clarity. Its value cannot be understated in ending the SEC-versus-CFTC jurisdictional dispute and providing legal certainty for the industry. However, clarity comes at a cost— the stablecoin earnings ban reveals how interests are being redistributed between traditional finance and the crypto world; asset classification definitions will profoundly affect future token issuance compliance paths; and the design of the DeFi framework will determine the space for decentralized finance to survive in the United States. For the industry, the core of this struggle is not whether the bill itself passes, but how the structural rules it sets will redefine the future of digital assets in the U.S. The bill’s value lies not in its final wording, but in the era of certainty it opens—even if the price of that certainty is paid by the entire industry together.

FAQ

Q1: What’s the difference between the CLARITY Act and the GENIUS Act?

The GENIUS Act was officially signed into law in July 2025 and specifically targets stablecoin issuers’ registration, reserve, and compliance requirements, explicitly prohibiting stablecoin issuers from paying interest. The CLARITY Act, by contrast, is aimed at a broader digital asset market structure: it is designed to delineate CFTC and SEC jurisdiction, regulate intermediaries such as exchanges and brokers, and provide a legal framework for token classification and DeFi activities.

Q2: How does the stablecoin earnings ban affect ordinary users?

Under the latest draft, digital asset service providers are prohibited from providing any form of passive yield or interest on stablecoin balances. Activity-based rewards (such as payments, transfers, and platform usage) are still allowed. The SEC, CFTC, and the Treasury will further define what reward types are permissible within twelve months after the bill takes effect.

Q3: What stage is the bill at right now?

In July 2025, the House passed it with a vote of 294 to 134. In late January 2026, the Senate Agriculture Committee passed its portion with a narrow bipartisan majority of 12 to 11. The Senate Banking Committee’s review is scheduled for the second half of April, and the draft is expected to be officially released in early April.

Q4: Is the bill good news or bad news for DeFi protocols?

It is bifurcated. On the one hand, the bill clearly excludes protocol developers and non-custodial services from the definition of financial intermediaries, providing a legal safe harbor. On the other hand, the stablecoin earnings ban will weaken the core competitiveness of DeFi protocols that rely on yield. Extending regulatory scrutiny to front-end interfaces and token economic model governance may subject projects like Uniswap and Aave to stricter compliance reviews.

Q5: What is the biggest obstacle to the bill passing?

The Senate needs 60 votes to pass the bill, and current partisan differences make it difficult to reach cross-party consensus. In addition, opposition between industry giants and bank-industry lobbying groups on the stablecoin earnings provisions has not been fundamentally resolved; policy research institutions estimate the likelihood of passage this year at only one-third. With the midterm elections approaching, the legislative window is narrowing.