Despite a surprising postponement of the markup for the crypto market structure bill known as the CLARITY Act, lawmakers are maintaining a hopeful outlook for the passage of the legislation. 

Senate Banking Committee Chairman Tim Scott announced the delay on Wednesday, stating that bipartisan negotiations are ongoing. He characterized the pause as tactical rather than indicative of failure. 

Coinbase CEO Voices Alarm Over CLARITY Act’s Potential Impact

In a message on social media platform X (previously Twitter), Scott expressed confidence, noting, “I’ve spoken with leaders across the crypto industry, the financial sector, and my Democratic and Republican colleagues, and everyone remains at the table working in good faith.” 

In an interview with Fox News prior to the cancellation of the markup, Scott noted that the Republican Party has made significant efforts to incorporate bipartisan support into the legislation. 

“We’ve taken over 90 of the Democrats’ priorities and filtered them,” he explained. Scott highlighted key issues, such as anti-money laundering (AML) measures, which are important to both parties, aligning on national security concerns.

However, the momentum faced a setback when Coinbase CEO Brian Armstrong withdrew the company’s support for the CLARITY Act in its current form. 

Armstrong raised concerns that the bill could prohibit tokenized equities, impose restrictions on decentralized finance (DeFi), and expand government access to financial data at the expense of individual privacy. 

The executive also cautioned that the legislation could shift power from the Commodity Futures Trading Commission (CFTC) to the Securities and Exchange Commission (SEC) and eliminate stablecoin rewards, potentially sidelining crypto competition.

Crypto Czar Urges Industry To Resolve Differences

Following the postponement of the vote, White House crypto czar David Sacks urged the industry to use this delay to address any remaining disagreements. “Passage of market structure legislation remains as close as it’s ever been,” Sacks stated on X.

The Trump administration continues to express a commitment to collaborating with Scott, the Senate Banking Committee, and industry stakeholders to advance bipartisan crypto legislation as swiftly as possible. 

Although the specifics of the bill are still under negotiation, there is widespread consensus among both asset managers and experts that federal intervention is crucial not only for the growth of cryptocurrency but also for consumer protection.

Kyle Wool, CEO of Dominari Securities, shared his perspective, stating, “As newer, more fringe industries grow and capital increases, there will be a greater need for oversight from regulators.” 

He outlined that proper regulations should not stifle innovation but instead ensure that markets remain fair, honest, and efficient for all investors. Wool added that such measures would also make the crypto market accessible to a broader audience, enhancing liquidity and depth. 

Pro-crypto Senator Cynthia Lummis, who has been an advocate for the growth and development of the digital asset industry, asserted that lawmakers are now “closer than ever,” with ongoing negotiations leaning toward a bipartisan agreement. 

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The CEO of Bank of America has warned that trillions of dollars could flee from bank deposits to the stablecoin sector if the upcoming crypto market structure bill allows interest payments on the tokens.

Banking System Could Face $6 Trillion Problem

On Wednesday, Bank of America CEO Brian Moynihan told investors that the banking industry could face significant challenges if the US Congress does not prohibit interest-bearing stablecoins.

During its Q4 earnings call, the executive affirmed that up to $6 trillion in deposits, around 30% to 35% of all US commercial bank deposits, could flow out of the banking system and into the stablecoin sector, citing Treasury Department studies.

The banking sector has heavily criticized the US’s landmark stablecoin legislation, the GENIUS Act, for months, claiming that it has loopholes that could pose risks to the financial system. Notably, the crypto framework prohibits interest payments on the holding or use of payment-purpose stablecoins but only addresses issuers.

Multiple banking associations across the US sent a joint letter to the Senate Banking Committee urging Congress to amend the law to include digital asset exchanges, brokers, dealers, and related entities.

According to the call’s transcript, Moynihan compared the digital assets to money market mutual funds, which require reserves to be held in short-term instruments, such as US Treasuries, thereby reducing lending capacity in the system.

That is the bigger concern that we’ve all expressed to Congress as they think about this, if you move it outside the system, you’ll reduce the lending capacity of banks. (…) And if you take out deposits, (…) they’re either not going to be able to loan or they’re going to have to get wholesale funding and that wholesale funding will come at a cost that will increase the cost of borrowing.

The CEO asserted that Bank of America would not be affected by this issue, as the institution would be able to “meet customer demand, whatever may surface.” However, he noted that it would particularly hurt small- and medium-sized businesses, as they’re “largely lent to end consumers by the banking industry.”

Stablecoin Rewards Debate Intensifies

Moynihan’s remarks come amid the Senate’s struggles with the long-awaited market structure bill. The recently shared draft, which was scheduled for a markup today, has raised concerns among crypto industry leaders, who have outlined multiple problems with the bill.

Coinbase’s CEO, Brian Armstrong, took to X to share his disappointment with the legislation, affirming that “this version would be materially worse than the current status quo. We’d rather have no bill than a bad bill.”

He affirmed that, after reviewing the bill’s draft, Coinbase could not support it in its current state, arguing that there were “too many issues.” Among the problems, he noted the de facto ban on tokenized equities, crucial DeFi prohibitions, the “erosion” of the Commodity Futures Trading Commission (CFTC)’s authority, and the policies regarding the payment of interests on stablecoins.

As reported by Bitcoinist, this version of the market structure bill introduced key restrictions for stablecoin issuers. Under the proposed changes, issuers would be able to offer rewards for specific actions, such as account openings and cashback.

However, they are prohibited from offering interest payments to passive token holders. To Armstrong, this “would kill rewards on stablecoins,” and allow banks to “ban their competition.”

Amid the intensified backlash, Senate Banking Committee Chairman Tim Scott announced on Wednesday that the bill’s markup had been postponed to “deliver clear rules of the road that protect consumers, strengthen our national security, and ensure the future of finance is built in the United States.”

As the anticipated markup of the CLARITY Act approaches, supporters of the digital asset market are raising alarms over the latest draft of the bill. They claim that the revisions pushed by banking lobbyists threaten to undermine the principles of the cryptocurrency industry.

Ban On Yield Payments In CLARITY Act 

In a recent post on social media platform X (formerly Twitter), market expert Nick Cash vocalized his strong opposition, stating that the current iteration of the CLARITY Act must be boycotted. 

He described it as a mechanism for banks to manipulate the future of cryptocurrencies, portraying their influence as a detrimental force for innovation in the sector.

The revised version of the CLARITY Act, which serves as a comprehensive crypto market structure bill, introduces significant restrictions on stablecoin issuers like Circle and Ripple. Notably, these firms will be prohibited from offering yield back to passive token holders. 

Title IV of the Digital Asset Market Consumer Protection Act (DAMCA) outlines how regulated banking institutions can interact with digital assets, mandating that stablecoin issuers—defined by the GENIUS Act—cannot make interest payments to holders.

Under the proposed changes, while stablecoin issuers would still be able to provide rewards tied to specific actions (such as account openings and cashback), the ban on yield payments poses a serious concern for the crypto industry, which has consistently viewed yield protection as a non-negotiable issue. 

Cash argues that the modifications may leave crypto-native issuers positioned at a competitive disadvantage against traditional banks. He warned that such restrictions could severely impact decentralized finance (DeFi) and the overall cryptocurrency landscape.

Expressing his frustration, Cash stated that those supporting the revised bill are essentially siding with banks and undermining the crypto movement. 

Strong Public Support For Stablecoin Rewards

Banking institutions have argued that allowing these interest payments could lead to a significant outflow of deposits from insured banks, threatening overall financial stability. 

In contrast, crypto advocates counter that blocking crypto exchanges from paying interest on stablecoins is anti-competitive and detrimental to innovation. Summer Mersinger, CEO of the Blockchain Association, articulated her stance, asserting:

What is threatening progress is not a lack of policymaker engagement, but the relentless pressure campaign by the Big Banks to rewrite this bill to protect their own incumbency. 

She highlighted that the demand to eliminate stablecoin rewards aims to restrict consumer choice and stifle innovative financial products before they have the chance to compete.

Amid this ongoing CLARITY Act debate, Stuart Alderoty, Chief Legal Officer at Ripple, weighed in, emphasizing that American consumers value their freedom to choose. 

He referenced new data from The National Cryptocurrency Association, which indicates a strong public preference—nearly 4-to-1—in favor of allowing stablecoin rewards, along with little appetite for government intervention to curb them.

Ultimately, the future of the CLARITY Act remains uncertain as stakeholders continue to voice their concerns about the implications of increased banking oversight on the cryptocurrency market.

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As the Senate Banking Committee prepares to mark up the newly proposed draft of the crypto market structure bill, the DeFi Education Fund has released a list of amendments it strongly urges senators to oppose. 

In a recent post on social media platform X (formerly Twitter), the organization expressed concerns that the descriptions of the draft indicate potential harm to decentralized finance (DeFi) and could negatively impact software developers.

Red Flags Emerge From Crypto Market Structure Bill Draft 

In its message, the DeFi Education Fund emphasized the importance of safeguarding the integrity of the emerging DeFi landscape and called on senators to consider the far-reaching consequences of these proposed changes. 

Among the amendments highlighted were Amendment #42, proposed by Senators Reed and Kim, which seeks to authorize the Treasury to sanction smart contracts and centralized platforms involved in illicit activities. 

This amendment raised significant red flags for advocates who worry about its implications for innovation and operational flexibility within the decentralized finance ecosystem.

Another amendment of concern, Amendment #45 by Senator Reed, aims to create a specific definition for digital assets under the Bank Secrecy Act. 

Similarly, Amendment #47, also from Senator Reed, intends to remove a provision related to federal criminal offense concerning unlicensed money transmission. 

These changes, according to the DeFi Education Fund, loom dangerously over the operational landscape for developers and financial institutions that interact with digital assets.

Stifling DeFi Growth

Additionally, Senators Cortez Masto’s proposed amendments, specifically #72 and #73, aim to narrow the definition of non-controlling developers and expand the authority of the Financial Crimes Enforcement Network (FinCEN) alongside the Treasury for blockchain-enabled platforms. 

Amendments #74 and #75 further seek to strengthen existing laws related to money transmission and prohibit transactions involving unlawful DeFi protocols, which the Fund suggests could stifle the industry’s growth.

Amendment #104, proposed by crypto-skeptic Senator Elizabeth Warren, also drew attention by striking a key distribution carve-out for crypto offerings. 

This follows similar calls by Summer Mersinger, CEO of the Blockchain Association, who recently claimed that the “Big Bank Lobby” is pushing Congress to change key provisions of the already enacted GENIUS Act concerning stablecoin rewards, further highlighting the current state of the future of crypto in Congress. 

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As the Senate Banking Committee prepares for the markup of the anticipated crypto market structure bill, known as the CLARITY Act, an updated draft has been released following extensive negotiations. 

This new version aims to provide a clearer regulatory framework for digital assets, defining oversight responsibilities between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). 

Major Takeaways From The Crypto Bill’s Draft

The latest draft released on Monday night, includes critical provisions recognized as gains for the industry. Notably, Paul Barron, a market expert, pointed out that the bill now defines “Custodial and Ancillary Staking Services” as a recognized activity, emphasizing that such services are considered “administrative or ministerial.” 

As a result, registered intermediaries will be allowed to facilitate staking for customers while ensuring that individual assets are segregated from the platform’s own funds. However, assets can be pooled with others for efficiency, such as through an omnibus account.

The bill also reinforces the existing status quo concerning anti-money laundering (AML) and know-your-customer (KYC) regulations. Exchanges and brokers will still be required to comply with the Bank Secrecy Act, perform KYC checks, and monitor for any illicit financial activities.

Key wins for consumers include an explicit right to self-custody. Section 105(c) of the bill grants US individuals the right to maintain a hardware or software wallet for their own lawful custody of digital assets. 

Additionally, this section protects the ability to engage in direct peer-to-peer (P2P) transactions using self-custody wallets without the need for financial intermediaries.

Furthermore, the legislation aims to safeguard wallet developers. Section 109 ensures that non-controlling blockchain developers or providers of hardware or software facilitating customer custody will not be classified as money transmitters. 

This provision of the crypto market structure bill protects developers of wallets, such as those from Ledger, Tangem, and MetaMask, from being regulated as financial institutions solely based on their coding efforts.

Critical Insights On DeFi Provisions

Another significant aspect of the bill is its provisions regarding decentralized finance. The Act establishes exclusions that help protect DeFi protocols and developers from being classified as centralized exchanges (CEXs) or brokers. 

Specifically, Section 309 states that individuals will not be subject to the Securities Exchange Act solely for activities such as developing DeFi trading protocols, publishing user interfaces for blockchain systems, or operating nodes.

For consumers using DeFi products and protocols, the Act creates a legal “safe harbor,” allowing continued use of decentralized finance without the imposition of forced intermediaries. However, it is important to note that this does not provide immunity for any illicit financial activities.

Pro-crypto Senator Cynthia Lummis, who led the Republican Party’s negotiations to achieve the best possible results for digital asset growth in the country, sent the following message to her Democratic colleagues on social media: 

After months of hard work, we have bipartisan text ready for Thursday’s markup. I urge my Democrat colleagues: don’t retreat from our progress. The Digital Asset Market Clarity Act will provide the clarity needed to keep innovation in the U.S. & protect consumers. Let’s do this!

As for the crypto bill’s likelihood of passing, Barron suggests a medium-high probability, estimating a 60-70% chance it could become law in early 2026. 

However, the expert asserted that the outcome may hinge on either removing or softening the “Anti-CBDC” provisions or making concessions to banks regarding stablecoin reserves to meet the Senate threshold.

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