The cryptocurrency industry welcomes a regulatory milestone: A comprehensive overview of the CLARITY Act legislation and its market impact forecast

On May 14, 2026, the U.S. Senate Banking Committee will hold a legislative review hearing for the CLARITY Act and vote on the 2025 Digital Asset Market Clarity Act (H.R. 3633). After months of back-and-forth between stablecoins and banking interests, the bill’s momentum has accelerated markedly. Polymarket prediction contracts show a 75% chance that it will become law by 2026.

The legislative process enters a critical countdown—why is the Senate review so urgent?

The CLARITY Act has been moving through the legislative process for months. On July 17, 2025, the House of Representatives passed the draft with a large margin of 294 to 134, establishing an initial framework for the SEC and CFTC functional split. The bill then moved to the Senate, but was temporarily postponed in the originally scheduled review in January 2026. The core point of contention has centered on whether the stablecoin yield provisions can win approval from both the banking industry and the crypto industry.

From April to May 2026, the bill continued to advance. Large numbers of crypto companies and industry organizations—including Circle, Coinbase, Ripple, and Kraken—kept lobbying Congress, sending a strong signal to “complete the legislation as soon as possible.” Galaxy, a digital asset research firm, warned that all procedures must be completed by May. If the timeline slips to after mid-May, the probability of the bill formally taking effect in 2026 will drop significantly. Even more critically, on May 21, Congress will enter a recess for Memorial Day, leaving only a two- to three-week window for the bill to move forward. If that window is missed, according to Senator Lummis, the next Congress would cause the legislative process to effectively restart from zero. Therefore, the May 14 review is not just a procedural meeting—it is at the intersection of a “life-or-death sprint” for the bill.

How can core disagreements be resolved? An interpretation of the compromise policy for stablecoin yield provisions

The stablecoin yield mechanism is the biggest obstacle to moving the bill forward. Banking industry stance: If stablecoins can pay interest just like bank deposits, why would depositors keep their funds in the traditional banking system protected by deposit insurance? The banking sector warns that allowing crypto platforms to pay yields on idle stablecoins could trigger large-scale outflows of bank deposits, thereby threatening financial stability. Crypto industry stance: A reverse ban would distort the competitive landscape and deprive users of fundamental rights within the crypto economy.

The compromise approach is clear: ban deposit-like yields and allow activity-based rewards. Users cannot receive interest merely for holding stablecoins—which is too similar to traditional bank deposit models—but users can earn activity-based incentives by using stablecoins for payments, participating in trades, providing liquidity, and so on. Lawmakers have not eliminated crypto yields; they have only required that yields be tied to an explicit “economic activity” consideration in exchange. As of the time of writing, banking trade groups represented by the American Bankers Association and the Bank Policy Institute still believe that this wording “leaves room for addressing real risks that the legislation is intended to solve,” and they do not rule out submitting amendments at the hearing. Therefore, the May 14 review is not only a vote—it is the ultimate standoff over the boundaries of stablecoin yields.

What line does the CLARITY Act really draw? A deep dive into the triple classification mechanism

The core of the bill is not about defining what crypto assets “are,” but about setting out “who regulates what” between the SEC and the CFTC. This classification system divides digital assets into three categories:

Category 1—Securities (SEC jurisdiction): Tokens issued based on investment contracts, relying on the ongoing efforts of the issuer, continuing the logic of securities law regulation, and requiring the issuer to bear information disclosure obligations similar to those of traditional publicly listed companies.

Category 2—Digital commodities (CFTC-exclusive jurisdiction): Native tokens inherently tied to blockchain systems, which are recognized as digital commodities under CFTC jurisdiction after verification through a “mature blockchain.” The verification mechanism sets a hard technical threshold: In the past 12 months, the issuer, related parties, and acting-in-concert parties must collectively hold no more than 20% of voting power. Once any “backdoor” permission to unilaterally modify the protocol logic is proven, the system will be unable to obtain recognition as a digital commodity under CFTC. This means that projects that previously relied on multi-signature schemes to effectively control power must be forced to implement a higher degree of decentralized governance.

Category 3—Permitted payment stablecoins (joint regulation): The bill establishes a regulatory stronghold close to a bank-level structure for stablecoins. Issuers must submit monthly financial transparency reports at the highest assurance level, and the CEO and CFO must assume federal criminal confirmation responsibility for the report’s truthfulness. The purpose of this mechanism is to end the long-standing risk of false reserve statements in the stablecoin space.

Who are the biggest potential beneficiaries? Sector segmentation and institutional capital reshuffling

If the CLARITY Act passes, the benefiting sectors will likely become clearly tiered, and that segmentation could trigger large-scale reallocation of institutional capital.

• CeFi exchange sector: Regulatory clarity will directly reduce exchanges’ compliance costs and the uncertainty premium. Large compliant exchanges can obtain institutional custody qualifications and stablecoin issuance licenses at lower cost, accelerating the shift of traditional financial institutions from a “wait-and-see period” to actual execution.
• DeFi infrastructure sector: The bill opens a safe pathway specifically for purely on-chain operations. Activities such as running validators, operating nodes, and distributing protocol-native rewards do not require SEC registration. However, boundaries must be noted: if liquidity staking projects involve strategy selection (such as redelegation or allocation of restaked funds), or if points or additional yield designs are layered in, they may be treated as securities issuance and enter more stringent regulatory procedures. The true beneficiaries are decentralized protocols with highly dispersed governance and no unilateral control permissions—their defenses evolve from optional strategies into prerequisites for institutional survival.
• Tokenization and RWA sector: The bill’s three-part classification mechanism creates clear asset characterization boundaries for digital assets, resolving the “what is a security versus what is a commodity” gray area that arises when real-world assets are tokenized on-chain. Tokenization projects supported by underlying real physical assets (U.S. Treasury securities, commodities, real estate) will receive an unprecedented degree of clarity in legal characterization.

At the macro level, the current total size of the crypto market is approximately $2.6 trillion, with the stablecoin market at about $317 billion. Bitcoin ETF holdings are approximately $98.6 billion. In April, U.S. spot BTC ETF cumulative net inflows were about $1.97 billion, reaching a monthly high since 2026. VanEck’s head of digital asset research notes that by pushing digital assets toward alignment with traditional financial tools at the institutional level, the CLARITY Act will improve the smoothness of compliance pathways for crypto ETFs.

How do the CLARITY Act and the GENIUS Act connect?

The GENIUS Act has already formally taken effect. It established a foundational regulatory framework for payment stablecoins, focusing on issuer eligibility requirements and reserve management obligations. The core of the CLARITY Act is to systematically classify crypto assets (digital commodities, securities, and permitted payment stablecoins). Together, they form a two-layer system of “eligibility standards + classification and jurisdiction”: GENIUS determines “who can issue,” while CLARITY determines “who the issuer falls under for regulation.” This institutional design ensures that stablecoin regulation is no longer fragmented; instead, it forms a complete closed loop from bottom-layer issuance eligibility to final regulatory attribution.

How does the U.S. CLARITY Act differentiate itself in the global crypto regulatory competition?

People in the crypto industry keep warning that the U.S. is losing the regulatory race, while Europe’s MiCA is filling the gap.

MiCA sets up a unified licensing system for 27 EU member states. Companies that meet the standards can obtain a “regulatory passport” across the entire EU. By contrast, the U.S. has long been stuck in legal disputes over SEC and CFTC jurisdiction, leaving projects unsure which agency they should register with and leaving exchanges uncertain which rules to follow. The CLARITY Act is the “missing unified rulebook”—it codifies the SEC and CFTC boundaries of responsibility into federal law and ends the periodic instability of enforcement-driven regulation. But risks remain. Some crypto attorneys have pointed out that static legal classifications are difficult to accommodate the rapid iteration of blockchain technology, and the CLARITY Act could repeat MiCA’s structural shortcomings. The true battleground lies precisely in the tension between future regulatory flexibility and rigid classification.

If there is a risk of delay, what happens if the May review is not approved?

From a fundamentals perspective, the bill faces three potential sources of resistance:

Resistance 1: The banking system’s final showdown. Although a compromise on stablecoin yield provisions has been reached, on the eve of the review, six major banking trade groups jointly issued statements opposing it. They warned that the compromise creates a loophole that could undermine traditional banking. The banking side will try to push for amendments through Republican lawmakers at the hearing, and even after the bill passes, they may continue lobbying for further revisions.

Resistance 2: Democrats’ AML concerns. Many Democratic lawmakers believe the anti-money laundering provisions are too weak and are calling for stricter measures to prevent criminal activity. If Democrats regain control of the House in the November midterm elections, the difficulty of future legislative coordination will rise significantly.

Resistance 3: The harsh reality of the time window. On May 21, Congress enters recess, and there is almost no opportunity for retroactive correction processes. As Galaxy analysts previously warned, if the review is delayed to after mid-May, the probability that the bill will formally take effect in 2026 will plunge.

Summary

The CLARITY Act is a pivotal turning point for U.S. crypto regulatory legislation, shifting from enforcement pilot programs and discretionary fragmentation toward a more systematic rulemaking approach. By dividing digital assets into securities, digital commodities, and permitted payment stablecoins, it ends the SEC–CFTC jurisdictional dispute that has lasted for years, providing exchanges, project teams, and institutional investors with the closest-to-codified-law certainty loop to date. But the battle of interests has not ended. Banking industry claims about the “last crack” in stablecoin reward provisions, Democrats’ tough stance on weak AML links, and the continually shrinking voting window all ensure that there remain variables in the bill’s path to passage that cannot be ignored. The market’s final decision does not hinge on May 14, but on the moment the vote counter appears.

FAQ

Q1: What is the CLARITY Act, and what problem does it mainly address?

The CLARITY Act—the 2025 Digital Asset Market Clarity Act (H.R. 3633)—primarily focuses on dividing regulatory responsibilities between the U.S. SEC and CFTC for crypto assets. It categorizes digital assets into securities, digital commodities, and permitted payment stablecoins, aiming to end long-standing ambiguity in jurisdiction and enforcement-style regulation.

Q2: What compromise did the bill ultimately reach regarding stablecoin yields?

The core compromise is “ban deposit-like yields and allow activity-based rewards.” Users cannot earn interest simply by holding stablecoins in a way similar to bank deposits, but they can earn incentives through real economic activities (such as payments, trading, or providing liquidity). This compromise is intended to ease concerns about bank deposit outflows while preserving space for crypto platforms’ core activities.

Q3: If the bill is passed, which types of crypto assets or projects stand to benefit the most?

Three categories stand to benefit first: (1) large CeFi exchanges that can accelerate institutional entry; (2) decentralized DeFi protocols with highly dispersed governance and verification limited via 20% voting power; and (3) tokenized real-world asset (RWA) projects supported by underlying assets.

Q4: How do the CLARITY Act and the GENIUS Act differ?

The GENIUS Act is already in force and focuses on establishing baseline thresholds for payment stablecoin issuance eligibility and reserve management. The CLARITY Act is responsible for systematically classifying crypto assets and assigning regulatory jurisdiction. Together, they form a complete system of “eligibility standards + classification and jurisdiction attribution.”

Q5: Is the May 14 review the final vote?

No. May 14 is the Senate Banking Committee’s review vote, determining whether the bill will be modified and whether it will be submitted for a full Senate vote. If the committee approves it, the bill still needs to go through the full Senate vote, reconcile with the already-approved House version, and ultimately be signed by the President. However, the Senate must pass it by the end of 2026; otherwise, the process will reset and restart.

Q6: If the bill is not passed by 2026, what does that mean?

If the 2026 window is missed, the next Congress would restart the legislative process, and it may not be until around 2030 that it can be relaunched. This would not only be a delay in time; it would also cause many crypto companies to continue moving their operations to jurisdictions with clearer regulatory frameworks, such as the EU, Hong Kong, or Singapore, thereby weakening the U.S.’s competitiveness in the digital asset space.