The CLARITY bill has successfully passed, but the future is still a long road ahead

Author: Chloe, ChainCatcher

The U.S. Senate Banking Committee yesterday passed the Digital Asset Market Clarity Act (CLARITY Act) with a bipartisan vote of 15 to 9, ending a four-month stalemate on this cryptocurrency market structure bill. The key was the bipartisan support from two Democratic senators, Ruben Gallego and Angela Alsobrooks, which allowed the bill to move to the next stage, where it still needs to be merged with the version from the Agriculture Committee before being sent to the full Senate.

Following the news, the cryptocurrency market surged. Bitcoin climbed to $81,500, up about 3%, Coinbase's stock price soared over 8% during trading, Strategy rose 7%, Galaxy Digital increased by over 6%, and Circle, which had initially dropped 6%, turned positive. On the same day, the S&P 500 index first crossed 7,500 points, but cryptocurrency stocks significantly outperformed the broader market.

Core of the Bill: Ending the Jurisdictional Dispute Between SEC and CFTC

The CLARITY Act is seen as the most important legislative goal for the U.S. cryptocurrency industry in Washington. Its core purpose is to end the long-standing ambiguity regarding the jurisdiction of the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) over digital assets, a gray area that has caused the cryptocurrency industry to suffer from a lack of regulatory clarity for years.

Specifically, the bill will clearly define which digital assets are considered commodities and which are securities, and it will regulate the obligations of exchanges, brokers, and custodians. The bill also protects "non-custodial" software developers and blockchain validators from being classified as "money transmitters."

In the U.S., once classified as a money transmitter, entities typically face obligations such as FinCEN registration, anti-money laundering requirements, transaction record-keeping, and suspicious activity reporting, with some activities potentially requiring state-level licenses. The controversy lies in the fact that non-custodial software developers do not actually hold or control user funds but could be drawn into money transmitter liabilities in certain cases. The role of the CLARITY Act is to distinguish centralized financial intermediaries from developers who simply provide code, establishing clearer legal boundaries for non-custodial activities.

Asheesh Birla, CEO of Evernorth, stated, "For years, U.S. blockchain entrepreneurs have been operating in a regulatory purgatory. Regulatory clarity can drive capital flow, and those institutions that have been observing this space are now one step closer to a framework they can act upon." Mari Tomunen, Chief Legal Officer of DoubleZero, pointed out the pain points in the non-custodial space: "Existing guidance indicates that non-custodial activities should not, in principle, pose legal risks of money transmission, but some litigation theories and court rulings point in the opposite direction. The CLARITY Act helps establish clearer legal boundaries for decentralized and non-custodial activities."

Cathy Yoon, Chief Legal Counsel of Harmonic, believes this legislation symbolizes a shift in Congress's attitude: "Moving from deliberation to a full Senate vote symbolizes an increasing recognition that not every cryptocurrency participant plays the role of a financial intermediary. Thoughtful legislation can set rules for custodians and centralized participants while preserving space for validators, open networks, and software developers."

Dramatic Last-Minute Turnaround

However, the deliberation process was not smooth. The entire morning was overshadowed by a partisan atmosphere, with both sides fiercely debating various amendments. The turning point occurred while the senators were still arguing, when Republican Chairman Tim Scott agreed to include several amendments he had previously rejected, in an effort to gain support from some Democratic senators for the bill. These additional amendments covered three major areas: enhancing investor protection, clarifying the scope of cryptocurrency-related activities banks can engage in, and defining what constitutes a "truly decentralized" DeFi project.

The last item has been a long-standing issue championed by Democratic Senator Mark Warner, who advocates for stricter protective mechanisms for DeFi. Notably, these additional amendments received rare bipartisan support, contrasting sharply with earlier amendments that had split along party lines.

Democratic Senator Elizabeth Warren strongly protested the process, criticizing the amendments as merely "insufficient compromises," ultimately casting a dissenting vote and stating that the bill "is not ready," arguing that the Senate has higher priorities than cryptocurrency legislation.

After the bill passed, Scott told the committee members, "This has been one of the most enlightening and challenging processes since I became a U.S. senator. The hours you all spent in dialogue and understanding each other are incredible." He expressed confidence that both parties would continue to work together to resolve remaining issues.

It is worth noting that the defection of Senators Ruben Gallego and Angela Alsobrooks was key to the bill's passage today. Both were deeply involved in the bipartisan negotiation process for the bill.

However, they both made it clear that the committee vote does not equate to support from the full Senate. Alsobrooks emphasized, "My vote today is a vote to continue good-faith negotiations; we have a lot of work to do." She stated that if existing concerns are not resolved, she would not continue to support the bill in the full Senate vote. Gallego also indicated that his final vote would depend on subsequent developments.

These statements foreshadow the real challenges the bill will face moving forward.

Two Major Hurdles: Ethical Provisions and the 60-Vote Threshold

Despite passing smoothly today, the bill faces significant obstacles before it can be sent to President Trump for signing.

The first hurdle is the conflict of interest provisions for government officials. Democrats have set this provision as a condition for supporting the full Senate vote, requiring restrictions on financial ties between senior government officials and cryptocurrency companies. However, this provision was not included in the current deliberation. Democratic Senator Kirsten Gillibrand has repeatedly stated that without this provision, the bill cannot achieve the 60 votes needed for full Senate approval.

The White House has taken a hard stance on this. White House advisor Patrick Witt stated earlier this month at the Consensus Miami 2026 conference that any provision "specifically targeting the president" would not be accepted. Trump's deep involvement in the cryptocurrency industry makes this issue particularly sensitive and leaves very limited room for compromise between the two parties.

The second hurdle is the Senate's 60-vote threshold. Currently, Republicans hold only 53 seats in the Senate, meaning at least 7 Democratic senators need to support the bill. However, these votes are precisely tied to the ethical provisions that Republicans resist, creating a legislative deadlock.

In response to this deadlock, Cody Carbone, head of the cryptocurrency industry lobbying group Digital Chamber, analyzed to CoinDesk that a bipartisan agreement on the ethical provisions is likely to be negotiated before the bill is placed on the Senate's full agenda. He explained, "They will only bring the bill to a vote when they are confident they have 60 votes." In simple terms, the Senate majority leader will not risk bringing a potentially failing bill to the agenda; this is a basic political game rule.

Therefore, the industry generally expects that the final version of the ethical provisions will be determined in behind-the-scenes negotiations, and by the time the bill actually reaches the Senate floor, all key disputes should have been resolved. Carbone further pointed out that the entire process must be completed before the August congressional recess; otherwise, the bill may miss this year's legislative window. This timeline aligns with Democratic Senator Kirsten Gillibrand's recent assessment, as she also believes that if the bill cannot advance before the summer recess, the chances of it passing this year will significantly decrease.

Additionally, the bill must also address concerns about financial crime. Beyond the ethical provisions, some Democratic senators still express doubts about whether the bill can effectively prevent cryptocurrency and DeFi technologies from being used for financial crimes. Law enforcement-related provisions are also one of the key issues that must be resolved in subsequent negotiations; otherwise, it will be difficult to garner enough Democratic support.

Traditional Finance's Last-Minute Counterattack Fails

Moreover, in the week leading up to the vote, the U.S. banking industry mobilized vigorously against the CLARITY Act. The American Bankers Association (ABA) sent over 8,000 letters to Senate offices warning that the "stablecoin yield" provisions in the bill could lead to massive withdrawals from traditional banks to the cryptocurrency industry.

The final version of the bill adopted a compromise reached by Senator Thom Tillis (Republican) and Senator Angela Alsobrooks (Democrat) earlier this May: it prohibits stablecoin companies from paying passive interest similar to savings accounts (meaning users can earn interest just by holding their money), but allows "usage-based" rewards (for example, users can receive rewards when they engage in transactions, transfers, or staking activities).

When this plan was announced on May 4, Circle's stock price surged nearly 20% in a single day, reflecting the market's reaction to the outcome. The banking industry believes this compromise is overly friendly to stablecoin companies. Traditional banks are concerned that even if passive interest is prohibited, the gray area of "usage-based rewards" is still sufficient to attract significant deposit outflows, especially among younger generations and tech users.

Bank of America analyst Ebrahim H. Poonawala stated in a report earlier this May that he believes the plan is overall "net positive for the banking industry," as it alleviates regulatory uncertainty, but the ABA clearly disagrees with this optimistic assessment, which is why they mobilized extensively before the vote.

From today's voting results and market reactions, it appears that the banking industry's last-minute lobbying effort was ineffective. The bill passed smoothly with a vote of 15 to 9, and the stablecoin-related provisions remained intact, leading Circle's stock price to turn positive on the voting day, reflecting the market's belief that the stablecoin industry has maintained a crucial position in this legislative struggle.

Missing August Means Waiting Until 2030

The cryptocurrency industry certainly expressed strong approval of today's vote. Summer Mersinger, CEO of the Blockchain Association, called it a "decisive moment" and stated in a press release, "Digital asset policy must be built on a bipartisan foundation, and today's vote reflects the growing recognition across parties that America needs clear rules of the game." She also pointed out that the bill will help consumers access compliant and innovative financial products, benefiting consumers and reducing U.S. users' reliance on offshore platforms.

However, the subsequent process for the bill is quite complex. First, the version passed by the Banking Committee must be merged with the version that the Senate Agriculture Committee passed along party lines earlier this year. The integrated bill will then be sent for a full Senate vote, requiring 60 votes to pass.

After passing, the bill must also be voted on again by the House of Representatives. The House had previously passed a similar version with a significant vote of 294 to 134 in July 2025, so support from the House is relatively more assured. If the final versions from both chambers are consistent and legislative action is completed, the SEC, CFTC, and Treasury Department will be authorized to begin drafting implementation rules.

It is estimated that the entire rule-making process will extend until 2027, with most compliance deadlines expected to fall between 2027 and 2028. In other words, even if the bill passes Congress smoothly this summer, the cryptocurrency industry may still have to wait until 2027 or even later to operate under the new regulatory framework.

There is also a time pressure: if this opportunity is missed in August, it may not come again until 2030.

Whether the bill can "pass Congress smoothly" is itself uncertain, as there is little time left on the Senate's agenda, with the summer recess and midterm elections approaching, creating significant time pressure for the bill's advancement. Republican Senators Cynthia Lummis and Bernie Moreno have publicly warned that if the bill cannot advance before the August congressional recess, the next viable legislative window may not come until 2030, meaning that if this summer's opportunity is missed, the cryptocurrency industry may have to wait several more years for substantial legislative progress.

Perhaps for U.S. cryptocurrency operators who have been trapped in "regulatory purgatory" for years, today's 15 to 9 vote represents the most critical milestone on this long legislative road, but what lies ahead is still a hard battle against time.