CLARITY Act Latest Developments: Settlement on Stablecoin Yield Terms and the Crypto Regulation Power Struggle Analysis

In the first week of May 2026, a dispute clause regarded as the “final obstacle” was officially compromised, injecting new momentum into the Senate’s progress of the “Digital Asset Market Transparency Act” (CLARITY Act). On May 1st, Senator Thom Tillis and Angela Alsobrooks jointly announced the final text of the stablecoin yield clause—prohibiting crypto platforms from paying passive yields on holdings that are economically or functionally equivalent to bank deposits, while retaining reward mechanisms linked to “real activities or real transactions,” marking a substantial breakthrough after nearly four months of negotiation deadlock.

On May 5th, Tillis and Alsobrooks issued a joint statement declaring that the clause had reached its final version and would no longer be subject to further amendments. Senator Cynthia Lummis then posted on social media that “we are closer than ever to pushing the CLARITY Act over the finish line.”

The CLARITY Act passed smoothly in the House in July 2025 with bipartisan support but faced fierce tug-of-war between traditional banking interests and the crypto industry upon entering the Senate. The scheduled Senate Banking Committee review in January 2026 was canceled, triggered by Coinbase CEO Brian Armstrong withdrawing support over the yield clause. Four months later, a compromise emerged, attempting to dismantle an inherently unavoidable structural dilemma: can stablecoin holders earn yields?

Reconstructing the Background and Legislative Timeline

To understand the current bargaining logic, it is necessary to review the full path of the CLARITY Act—from bill to deadlock to breakthrough. The following is a reconstruction of the legislative timeline based on public records.

The timeline’s density clearly shows that the progress of the CLARITY Act is not linear but exhibits a “breakthrough—deadlock—breakthrough” pulse pattern. Each breakthrough is accompanied by fierce stakeholder negotiations, while each deadlock reflects a contest over the core economic attributes of stablecoins.

Structural Breakdown of the Compromise Clause: What Is Banned, and Who’s Still Allowed Space

The Tillis-Alsobrooks compromise text involves precise conceptual segmentation in legal terms. The core clauses can be summarized as follows.

Explicitly Prohibited Actions. The bill stipulates that any digital asset service provider shall not pay any form of interest or yield to users solely for holding “payment-type stablecoins”—regardless of whether paid in cash, tokens, or other consideration—and this prohibition applies to “returns economically or functionally equivalent to bank deposit interest.” Notably, this scope extends far beyond the 2025 GENIUS Act—which only constrained “issuers”—to include exchanges, brokers, and other third-party platforms. Ji Hun Kim, CEO of the Crypto Innovation Committee (CCI), commented that “goes VERY FAR beyond” the GENIUS Act, covering all participants in the digital asset market.

Allowed Exceptions. The compromise text also sets clear exceptions: rewards linked to “real activities or real transactions” are not banned. This wording aims to leave a compliant pathway for reward mechanisms based on on-chain usage behaviors (such as trading rebates, staking yields, liquidity incentives, etc.).

Interpretation Authority. The bill requires the Treasury Department and the Commodity Futures Trading Commission (CFTC) to develop detailed rules within one year of enactment, clarifying which activities qualify as “eligible rewards” and the related disclosure requirements. This indicates that the current compromise addresses principle-level disputes, while the definitive definitions and detailed regulations will be shaped in subsequent rulemaking phases.

Dissecting the structure of the compromise clause yields a key distinction:

This distinction draws clear boundaries in logic, but in practice, the definition of “real activity” remains a battleground for stakeholders in the next phase.

Industry Sentiment Landscape: A Three-Party Power Play

The intense controversy over the CLARITY Act stems from its impact on three distinct interest groups. Based on public statements and media reports, here is an objective breakdown of their positions.

Crypto Industry: Limited Support, Core Interests Preserved. Coinbase responded swiftly after the compromise text was announced. Chief Legal Officer Paul Grewal stated that the clause “retains activity-based rewards linked to real participation on crypto platforms and networks,” while CEO Brian Armstrong directly tweeted “Mark it up”—urging immediate progress. Dante Disparte, Chief Strategy Officer of Circle (issuer of USDC), called the compromise “an encouraging signal that the U.S. is leading in digital assets.” At Consensus 2026, Grewal further expressed “very confident” that the CLARITY Act would be enacted before summer, noting that banks have not provided any data supporting their core argument that “stablecoin rewards will cause deposit outflows.”

Notably, over 120 crypto firms jointly supported the bill in late April, forming an industry-wide rare unified front. However, positions are not entirely aligned. CCI explicitly expressed concern over “overly broad prohibition clauses,” arguing that banks exaggerated the risk of deposit loss due to stablecoins.

Banking Sector: Internal Divisions Emerge. The banking industry’s stance on the compromise clause is not uniform. According to crypto journalist Eleanor Terrett, some large consumer banks are “dissatisfied” with the final wording—worried that crypto firms might find ways to circumvent restrictions through re-packaging. Conversely, banks without consumer-facing services are more accepting of the compromise direction. Importantly, the joint statement by Tillis and Alsobrooks on May 5th explicitly states “we respectfully acknowledge differences,” implying that resistance will not trigger new negotiations.

Political Layer: Multiple Pressures Accelerate Legislation.

Moody’s remarks at Consensus 2026 are particularly noteworthy. She elevates the legislative significance of the CLARITY Act from industry regulation to a national strategic level concerning the dollar’s international standing—adding a geopolitical dimension to the debate.

Market Data Perspective. Probabilities on Polymarket reflect real-time market pricing of event likelihoods. On May 2nd, the day after the compromise text was announced, the probability jumped from about 46% to 62%. Following collective gains in crypto stocks and clear support from major institutions, it rose to around 70% on May 5th, then stabilized around 63–64%. Meanwhile, Galaxy Research’s estimate was “50-50,” and TD Cowen’s early April analysis projected about one-third—published before the compromise was announced.

The wide dispersion of probability estimates indicates that market information is still being digested, and uncertainties remain high.

Scrutinizing the Narrative Authenticity: Which Claims Hold Water

In the discourse surrounding the CLARITY Act, some claims are repeatedly circulated but warrant careful examination.

“This is the last chance before 2030”—Valid but conditional. Senators Lummis and Moreno have publicly stated that if the CLARITY Act does not pass in 2026, the next legislative window would be at least until 2030. The core logic is that a rare political alignment exists among the White House, Senate, and House on crypto legislation in 2026, which is likely to be broken after the midterm elections.

“Banning stablecoin yields will protect the banking system”—Lacks supporting data. The White House Council of Economic Advisers (CEA) released a report in April quantifying the core argument. It found that a complete ban on stablecoin yields would increase bank loans by about $2.1 billion—an insignificant 0.02% increase in total loans—and consumers would lose about $800 million in welfare value due to the absence of competitive returns. The report’s clear conclusion: banning yields to protect banks “has essentially no effect.” This finding provides a strong policy basis for the Tillis-Alsobrooks compromise—since the economic rationale for a total ban is weak, a differentiated approach distinguishing “passive holdings” from “active use” is justified.

“Bipartisan consensus has been formed”—Partially true but with hurdles. On the surface, the compromise text has garnered support from major crypto players, and the banking sector’s opposition is not unified. Polymarket’s probability has risen sharply. However, two variables remain unresolved: first, negotiations over conflict-of-interest clauses are ongoing; second, at least 60 votes are needed in the Senate, requiring Democratic support—something not guaranteed, especially with midterm elections approaching. Additionally, once review begins, numerous amendments are likely, involving complex technical bargaining rather than a simple pass/fail vote.

Industry Impact: The Threefold Transmission of Stablecoin Regulation Reshaping

If the CLARITY Act passes as scheduled, its impact will propagate through the industry via these pathways:

Path 1: Passive transformation of stablecoin business models. The new rules essentially require crypto firms to shift from “buy-and-hold” to “buy-and-use” strategies. This means that platforms that previously attracted stablecoin deposits through “interest on holdings” will no longer be compliant. Instead, rewards will be tied to active behaviors like trading, staking, or on-chain interactions. For Circle, since USDC’s core business does not rely on paying yields, the impact is limited—hence their clear endorsement. Smaller platforms relying on high yields to attract users will face greater transformation pressure.

Path 2: Accelerated institutional capital inflows. Clarified regulation is often a prerequisite for large-scale institutional participation. The core function of the CLARITY Act—defining whether digital assets are securities or commodities, and clarifying SEC and CFTC jurisdiction—provides critical compliance guidance. As of May 8, 2026, the global crypto market cap is about $2.66 trillion, but many institutional investors remain on the sidelines due to regulatory uncertainty. The White House has set July 4th as a target for passage; if achieved, the latter half of 2026 could see a surge of institutional capital under compliant frameworks.

Path 3: International competitiveness. The EU has established a comprehensive digital asset regulatory framework via the Markets in Crypto-Assets (MiCA) regulation. White House advisor Patrick Witt warned: “If the U.S. does not set its own standards, it will be forced to follow others’ rules.” This geopolitical narrative elevates the CLARITY Act from an industry issue to a matter of global digital financial standards, influencing international competition.

Conclusion

The stablecoin yield compromise in the CLARITY Act appears, on the surface, as a technical breakthrough. Deep down, it marks the first formal delineation of the “money yield rights” concept between traditional finance and crypto-native economies. The boundary between “prohibition” and “permissiveness” seems clear, but the interpretation of “real activity” and the subsequent rulemaking process mean the narrative is far from over.

Quantitative analysis from the White House’s CEA has weakened the core banking argument at a data level, while the joint statement by Tillis and Alsobrooks clarifies the political boundary—no further negotiations will be reopened. These signals point to a shared understanding: the logical foundation and environment for the CLARITY Act are now more solid than ever.

As of May 8, 2026, the key variable is not the text itself—since it already exists—but whether the Senate’s upcoming agenda can translate it into tangible votes, and whether the unresolved conflicts and negotiations will reshape the final tally. In the eternal tension between regulation and innovation, these days in May 2026 may be marked as a watershed in future narratives.