The "CLARITY Act" will be reviewed next week; what will be the outcome for the stablecoin "interest payment rights"?

Original Title: US Senate Committee Set to Consider Long-Awaited Crypto Bill Next Week
Original Author: Hannah Lang, Reuters

Editor’s Note: U.S. crypto regulation enters a critical window again. On May 14, the U.S. Senate Banking Committee will review the CLARITY Act, a piece of legislation long championed by the crypto industry that aims to establish a clearer regulatory framework for the U.S. digital asset market. Its core is not just “a boon for the crypto industry,” but rather the U.S. is attempting to reintroduce unresolved regulatory disputes from the past few years into the legislative process.

Specifically, the CLARITY Act primarily addresses three issues.

First, clarifying the regulatory boundaries between the SEC and CFTC for digital assets. Over the past few years, crypto companies have long faced unclear jurisdiction issues: whether an asset should be regulated by the SEC as a security or by the CFTC as a commodity often depends on enforcement and case-by-case judgment. If enacted, this bill will define clearer authority boundaries for regulators, reducing the legal uncertainty faced by the industry for a long time.

Second, determining when tokens are classified as securities, commodities, or other categories. This is one of the core compliance issues in the crypto industry. For project teams, trading platforms, and investors, the nature of the token determines issuance, trading, disclosure, and regulatory responsibilities. The bill attempts to institutionalize classification, providing a more stable legal identity for digital assets and laying foundational rules for future product design and market access.

Third, through stablecoin reward provisions, easing conflicts between crypto companies and banks over deposit withdrawals. Under the current compromise, users holding idle USD stablecoins cannot earn interest-like rewards because this is considered too similar to bank deposits; however, rewards related to stablecoin use cases such as payments and transfers will still be permitted. In other words, regulators are trying to distinguish whether stablecoins are primarily payment tools or a form of disguised deposit product.

This is also where the conflict between the banking sector and the crypto industry is most acute. Banks worry that if intermediaries like trading platforms can pay yields to stablecoin holders, funds might flow out of the insured banking system, weakening traditional banks’ deposit base and posing financial stability risks. Crypto companies argue that banning third parties from offering yields around stablecoins essentially protects existing bank interests and limits market competition.

Therefore, the significance of the CLARITY Act extends beyond the crypto industry itself. It is not only about classifying tokens and dividing regulatory responsibilities but also about redrawing the financial boundaries among banks, trading platforms, stablecoin issuers, and payment providers: Can stablecoins resemble bank deposits more? How deeply can crypto companies integrate into payment and savings scenarios? Can traditional banks continue to monopolize the “interest on dollar balances” rights?

Next, whether the bill can garner enough support from Democratic senators will determine if U.S. crypto regulation can move from years of stalemate to actual implementation. The most noteworthy aspect is not whether the CLARITY Act is simply “crypto-friendly,” but that the U.S. is integrating stablecoins and digital assets into the core of financial infrastructure competition. Once regulatory boundaries are set, the future distribution of interests between crypto firms and traditional banks will also be reshaped.

Below is the original text:

U.S. senators are expected to review long-awaited legislation next week. The bill will establish a regulatory framework for cryptocurrencies and could break the deadlock that has previously surrounded it. This deadlock has at times pitted crypto companies against the U.S. banking industry.

If ultimately signed into law, the CLARITY Act will clarify the jurisdiction of financial regulators over this rapidly growing industry and could further promote the adoption of digital assets.

Senator Tim Scott, chairman of the Senate Banking Committee, said on Friday that the committee will hold an executive session at 10:30 a.m. on May 14 (2:30 p.m. GMT) at the Dirksen Senate Office Building in Washington, D.C.

The crypto industry has been pushing for this legislation, claiming it concerns the future viability of U.S. digital assets and is necessary to address core issues that have long troubled crypto companies. Among other things, the bill will define under what circumstances crypto tokens are considered securities, commodities, or other categories, providing legal certainty for the industry.

The bill also includes a clause aimed at resolving a fierce dispute between crypto firms and banks. According to a compromise brokered by Republican Senator Thom Tillis and Democratic Senator Angela Alsobrooks, rewards paid to customers holding idle USD-backed crypto tokens (i.e., stablecoins) will be prohibited because such arrangements are similar to bank deposits.

However, other activities related to stablecoins, such as payments and transfers, will be permitted. Banking trade organizations oppose this arrangement, arguing it gives crypto companies too much operational leeway and could lead to deposit outflows from the regulated banking system.

Ahead of the hearing, the banking industry is mounting a final effort to sway some Republican senators in the Senate Banking Committee, but it’s unclear whether they will succeed.

Bank lobbying groups have sought to add amendments to the CLARITY Act to close a “loophole” created by legislation signed into law last year. That loophole allows intermediaries to pay interest on stablecoins. Banks argue this could cause deposits to flow out of the insured banking system and threaten financial stability.

Crypto firms counter that banning third-party interest payments on stablecoins would constitute anti-competitive behavior.

The crypto industry hopes the CLARITY Act will pass within the next few months, before the November midterm elections, when Democrats might regain control of the House.

The House passed its version of the CLARITY Act last July, but the Senate needs to pass the bill by the end of 2026 to send it to President Donald Trump for signature.

Many Democratic members of Congress oppose the bill, citing insufficient anti-money laundering provisions and calling for more measures to prevent political officials from profiting from crypto projects.

To pass the Senate, the bill needs support from at least 7 Democratic senators.

President Trump has actively sought crypto industry funding and pledged to be a “crypto president.” Meanwhile, his family’s own crypto ventures have helped push the industry further into mainstream awareness.

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