Stablecoin yield compromise plan implemented: How does the CLARITY Act define the regulatory boundaries between the SEC and CFTC

The U.S. Senate Banking Committee officially approved the latest revised draft of the "Digital Asset Market CLARITY Act" on May 14, 2026, with a vote of 15 in favor and 9 against, pushing this 309-page legislation on crypto market structure toward a full Senate vote. This vote not only breaks a four-month legislative deadlock but also marks that the U.S. crypto industry is only a few steps away from a comprehensive federal regulatory framework. The key factors that will truly determine whether this bill can reshape industry logic hinge on two core arrangements: the division of regulatory jurisdiction between the SEC and CFTC, and the compromise on stablecoin yield schemes.

What legislative battles did the bill go through from stagnation to progress?

The advancement of the CLARITY Act is essentially the culmination of four months of political negotiations. Originally scheduled for review in January 2026, the bill was indefinitely delayed on the eve of the vote after Coinbase withdrew support over concerns about the stablecoin yield provisions. The turning point came on May 1, 2026, when Senators Tillis and Alsobrooks reached a bipartisan compromise—banning passive yields while retaining active rewards. Coinbase immediately announced support the next day. This strategic alliance created the political conditions for the bill’s progress. During the review session on May 14, all 13 Republican members voted in favor, along with Democratic Senators Ruben Gallego and Angela Alsobrooks, enabling the bill to proceed to a full Senate vote. It’s important to note that this support does not constitute a final commitment—Alsobrooks explicitly stated that the committee-stage vote was “a good-faith effort to advance negotiations,” and not the final position of the full Senate. She also emphasized the need to address enforcement regulatory loopholes, ethical clauses, and three other core issues. The bill still needs to be merged with the version from the Agriculture Committee, which is expected to take 2 to 3 weeks before it can be brought to the full chamber for voting.

How will the regulatory boundaries between the SEC and CFTC be redefined?

The core purpose of the CLARITY Act is to end the long-standing gray area over jurisdiction between the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) regarding digital assets. The bill proposes a “channel system”—allocating jurisdiction based on the functional lifecycle of digital assets. Specifically, tokens that rely on efforts by issuers, termed “auxiliary assets,” will fall under SEC regulation, requiring issuers to disclose audited financial statements, ownership structures, and tokenomics. Once control over the tokens is sufficiently dispersed and the network is fully decentralized, they will transition into “digital commodities,” regulated by the CFTC for trading venues and intermediaries. Regarding compliance obligations for exchanges and brokers, the bill also incorporates cryptocurrency exchanges, brokers, and dealers into the compliance framework of the Bank Secrecy Act. This regulatory division means early-stage tokens must adhere to strict disclosure and investor protection rules, while mature mainstream tokens traded on secondary markets will fall under a clearer commodity regulation framework. For developers, the bill preserves the core protections of the blockchain regulatory certainty act, stating that non-custodial software developers who do not control user funds will not be classified as money transmitters.

What are the specific contents of the compromise on stablecoin yield schemes?

The most controversial part of the CLARITY draft bill centers on Section 404, which defines stablecoin yield arrangements. The legislative language of the compromise has two core dimensions. First, the bill explicitly prohibits stablecoin issuers or platforms from paying “passive yields that are economically or functionally equivalent to bank deposit interest” to users. This means that models paying annualized returns based on static holdings are explicitly banned. Second, the bill clearly permits incentive-based rewards based on real economic activities, including cashback payments, trading discounts, staking incentives, and user rewards linked to consumption behaviors. The legislative intent is to strictly prevent stablecoins from functioning as a substitute for bank deposits. Allowing non-bank entities to pay deposit-like interest on stablecoin holdings would risk shifting funds from banks—without deposit insurance—into crypto platforms. This fundamental consideration underpins the bill’s distinction between passive interest and active rewards, maintaining a drive-based incentive model.

What are the strategic dynamics between the banking sector and crypto firms?

The debate over stablecoin yields essentially reflects a power struggle over control of financial infrastructure between the banking industry and crypto companies. Banks demand a strict ban on static yield payments, insisting stablecoins should not serve as interest-bearing deposits. They have exerted pressure through numerous letters to the Senate, warning that allowing non-bank entities to pay near-bank interest on stablecoin holdings could lead to trillions of dollars in deposits leaving the banking system. Conversely, crypto firms see the “active rewards” carve-out as vital for their stablecoin business to remain compliant. Exchanges can continue designing incentives based on actual user payments, trading, or staking activities, rather than relying solely on holding-based yields to retain user engagement. The banking sector remains dissatisfied, arguing that certain rewards based on trading frequency or holding duration could effectively be equivalent to interest, creating regulatory loopholes. This indicates that detailed regulations on stablecoin yields will need further clarification in subsequent rules from the White House and regulators.

How do markets and institutions interpret the current legislative landscape?

The news of the CLARITY bill’s progress has immediately boosted sentiment in the crypto market. Following the announcement, Bitcoin surged past $82,000 USD, and major crypto stocks saw significant gains. As of May 22, 2026, the total global crypto market cap is approximately $2.64 trillion, with stablecoins totaling around $317 billion. Citibank analysts note a clear logical link between the bill’s smooth passage and the baseline scenario of Bitcoin reaching $143,000 USD by December 2026. In institutional research, Galaxy Digital’s head of research Alex Thorn has raised the probability of the bill becoming law in 2026 to 75%, up from 50% in April. a16z crypto compares this legislative development to the significance of the 1933 Securities Act, believing that once enacted, CLARITY will usher in a new wave of innovation in the U.S. crypto industry. SEC Chair Paul Atkins is also pushing for a “regulatory sandbox” for tokenized stocks on regulated trading systems. However, the overall market pricing on Polymarket for the bill’s passage in 2026 is about 68%, reflecting cautious market expectations due to potential ethical clause disputes and the number of Democratic cross-party votes.

What are the procedural hurdles and processes for a full Senate vote?

For the CLARITY bill to become law, it must pass through multiple legislative stages. The version from the Banking Committee needs to be merged with the version already passed by the Agriculture Committee in January, forming a unified text before proceeding to a full Senate vote. The first hurdle is overcoming the “cloture” motion—requiring 60 votes out of 100 senators to end debate and potential procedural delays. Currently, Republicans hold 53 seats, so at least 7 Democratic senators must cross party lines. Two Democratic senators have already voted in favor, but the remaining gap remains. The most uncertain issue is the ethical clause dispute—Democrats want to include restrictions on senior officials’ digital asset holdings, including constraints related to Trump’s family’s crypto interests. The White House has made clear it will not accept legislation targeting the President personally, so negotiations are ongoing. White House digital asset advisor Patrick Witt’s target signing date is July 4, but Senator Lummis warns that missing this legislative window could push the next opportunity to 2030. Even if the Senate passes the bill smoothly, it must be reconciled with the House version passed in July 2025 before being sent to the President. Regarding compliance timelines, the CFTC registration pathway will open 180 days after enactment, with most substantive rules taking effect after 360 days, meaning full regulatory operation may not occur until 2027 or 2028.

What structural changes will the industry face after the bill’s passage?

Once enacted, the CLARITY Act will bring several structural shifts across multiple dimensions. In terms of regulatory clarity, it will provide a clear compliance pathway for crypto projects—startups will no longer need to guess whether their tokens are classified as securities by the SEC but will be regulated according to their asset lifecycle stage. In the stablecoin ecosystem, banning static yield payments will push stablecoins from “interest-bearing holdings” toward “use-based incentives,” clarifying their role as payment settlement infrastructure rather than deposit substitutes. In decentralized finance (DeFi), the bill’s protections for fully decentralized protocols (non-custodial developers not subject to money transmitter registration) will offer compliance space. However, it also tightens standards for “decentralization,” meaning protocols with governance concentrated in a few entities may not qualify for exemptions. For exchanges and trading platforms, the bill introduces federal broker registration obligations and anti-money laundering compliance, significantly increasing operational costs but also reducing regulatory uncertainty caused by previous enforcement-by-legislation approaches.

Summary

The CLARITY Act’s bipartisan approval by the Senate Banking Committee marks a turning point in U.S. crypto regulation—from long-standing “enforcement-driven legislation” to systematic rulemaking. Its core value lies in ending the decade-long jurisdictional dispute between the SEC and CFTC, establishing a clear regulatory framework for digital assets and trading platforms. The stablecoin yield compromise—banning passive holdings interest while permitting active rewards—strikes a delicate balance between banking interests and crypto firms. Although the bill still faces legislative hurdles such as the 60-vote threshold and ethical clause disputes, it has already sparked widespread optimism among markets and institutions. Whether it’s the compliance pathways for crypto projects, the evolution of stablecoin business models, or the operational frameworks for exchanges, the CLARITY Act will fundamentally reshape the operational logic of the U.S. crypto industry.

FAQ

Q: What stage is the CLARITY bill currently at in the legislative process?

The bill was approved by the Senate Banking Committee on May 14, 2026, with 15 votes in favor and 9 against. It is now being merged with the Agriculture Committee’s version, and the next step is a full Senate vote. To pass, it needs to clear the 60-vote cloture threshold and then be voted on by the entire Senate. Afterward, it must be reconciled with the House version passed in July 2025 before being signed into law by the President.

Q: How will the SEC and CFTC’s regulatory authority be divided?

Tokens relying on issuer efforts, termed “auxiliary assets,” will be regulated by the SEC, requiring detailed disclosures at issuance. Once control over the tokens is sufficiently dispersed and the network is decentralized, they will transition into “digital commodities,” regulated by the CFTC for secondary trading venues. This framework aims to end years of jurisdictional ambiguity and litigation.

Q: What are the compliance boundaries for stablecoin yields?

The CLARITY bill prohibits stablecoin issuers or platforms from paying passive yields that are economically or functionally equivalent to bank deposit interest. However, it explicitly permits incentive-based rewards based on real economic activities—such as payments, trading, staking, and user engagement—aimed at preventing stablecoins from functioning as deposit substitutes.

Q: What is the probability of the bill passing?

Different institutions have varying estimates: Galaxy Research assesses a 75% chance, while market prediction platform Polymarket prices it at about 68%. The main uncertainties involve the 60-vote Senate threshold, the number of Democratic cross-party votes, and unresolved ethical clause issues.

Q: When will the bill take effect after passing?

Even if the bill completes all legislative steps by summer 2026, most substantive regulatory rules will only take effect after approximately 360 days—around 2027 to 2028. The actual operational regulatory framework will thus be delayed accordingly.