April 2026 marks a pivotal moment for U.S. crypto regulatory legislation. On April 19, President Trump posted a series of tweets strongly endorsing the CLARITY Act. Treasury Secretary Scott Bessent simultaneously declared that the bill would make the United States "the world’s most advanced country for crypto regulation" and called on the Senate Banking Committee to immediately begin its review. This joint pressure from the executive and treasury branches over a single weekend is unprecedented in the history of crypto legislation.
However, since the bill passed the House in July 2025 by a vote of 294 to 134, it has been stalled in the Senate Banking Committee for over 270 days. Alex Thorn, Head of Research at Galaxy Digital, warned that if the review is delayed beyond mid-May, the likelihood of passage in 2026 will plummet—now estimated at just 50% or even lower.
Ending the SEC-CFTC Turf War
At its core, the CLARITY Act aims to resolve the longstanding "dual jurisdiction" dilemma in U.S. digital asset regulation—where the same token might fall under both SEC and CFTC scrutiny, or, at times, neither. The bill introduces a classification framework based on an asset’s functional lifecycle, dividing digital assets into two main categories: "digital commodities" and "investment contract assets."
Specifically, assets that are sufficiently decentralized and no longer dependent on the efforts of a single issuer are classified as digital commodities, falling under the exclusive jurisdiction of the CFTC. This includes anti-fraud enforcement and oversight of exchanges and brokers. Early-stage assets with clear fundraising characteristics remain under SEC regulation, which covers disclosure requirements and investor protection. The bill also introduces quantitative criteria: to qualify as a digital commodity under CFTC oversight, a system must prove that the combined voting power held by the issuer and its affiliates does not exceed 20% over the past 12 months. This measurable technical threshold replaces the subjective Howey Test, offering the industry a predictable compliance pathway.
Why Stablecoin Yield Provisions Became the Battleground
As the bill progressed, debate quickly shifted from asset classification to a more specific issue—the stablecoin yield provision. Currently, stablecoin issuers typically invest reserve funds in low-risk assets such as short-term U.S. Treasuries to earn interest, then indirectly distribute these earnings to users through exchanges as "rewards" or "rebates," creating a "quasi-interest transmission chain."
The Senate’s revised draft imposes substantial restrictions here. According to the disclosed text, digital asset service providers would be prohibited from offering passive yield on stablecoin balances or any arrangements economically equivalent to bank deposit interest. However, incentives based on payments, transfers, and other on-chain activities would still be permitted. The SEC, CFTC, and Treasury will jointly define the boundaries between legitimate incentives and indirect interest. The core logic of this approach is to draw a legal line between stablecoins as "payment tools" and as "savings products."
How Banking Industry Lobbying Stalled the Process
The banking sector’s opposition to the stablecoin yield provision is the most direct reason for the bill’s Senate gridlock. Banks argue that allowing stablecoin platforms to pass reserve interest to users would, in effect, let them offer products similar to bank deposits without being subject to bank capital, liquidity, or consumer protection requirements, potentially triggering systemic deposit outflows.
After over two months of negotiations, Senators Thom Tillis and Angela Alsobrooks reached a tentative compromise in late March, but the banking industry reversed course at the last minute. The North Carolina Bankers Association organized member banks to pressure Tillis’s office, expanding lobbying efforts to other Banking Committee members. On April 17, Tillis announced a delay in releasing the compromise text, citing unclear review timelines, and postponed the committee’s markup from April to May.
Patrick Witt, Executive Director of the White House Digital Assets Committee, publicly criticized the ongoing banking lobby, stating, "It’s hard to interpret further lobbying as anything other than greed or ignorance." An April 8 report by the White House Council of Economic Advisers estimated that banning passive stablecoin yield would increase total U.S. bank lending by only about $2.1 billion, while costing consumers roughly $800 million in annual returns—an empirical analysis that weakens the banks’ policy argument.
Industry Split: Why Coinbase Publicly Opposed the Bill
Banks aren’t the only stakeholders. Coinbase’s Chief Legal Officer, Paul Grewal, made it clear to lawmakers that they could not support the CLARITY Act while opposing crypto rewards. According to Bloomberg Intelligence, stablecoin-related revenue accounts for about 19% of Coinbase’s projected 2025 total revenue, so any restrictions on yield would directly impact its balance sheet.
Notably, on April 10, Coinbase CEO Brian Armstrong formally endorsed the CLARITY Act, reversing his previous opposition. This shift signals that, despite lingering disagreements over the yield provision, industry leaders recognize that missing the 2026 legislative window poses a greater risk than the cost of the provision itself. Additionally, Senate draft clauses restricting the tokenization of traditional financial assets and explicitly excluding RWAs (real-world assets) from the digital commodity category have sparked broader industry concerns.
Does Trump’s Personal Conflict of Interest Affect Legislation?
Another sensitive aspect of the CLARITY Act debate is the ethical controversy surrounding Trump’s personal involvement in crypto assets. The Trump family’s issuance of the $TRUMP meme coin has drawn ongoing criticism from Democrats, with some lawmakers pushing to add ethics clauses to the bill that would restrict senior government officials and their families from profiting from crypto assets during their term.
Public reports indicate that during the 2025 review process, Democratic lawmakers repeatedly questioned whether Trump’s crypto involvement constituted a conflict of interest. If Democrats retake the House in the midterms, such ethical disputes could become a political obstacle to the bill’s final vote. For now, however, the White House’s strong backing suggests unity within the executive branch, and ethics provisions are seen more as bargaining chips in partisan negotiations than as deal-breakers.
Legislative Timeline: Why May Is the Last Window
Procedurally, the CLARITY Act’s markup in the Senate Banking Committee has been postponed from April to mid-May. Afterward, it must clear a full Senate vote (requiring 60 votes), be reconciled with the Agriculture Committee’s version, coordinated with the House version, and finally sent to the President for signature.
Senator Bernie Moreno has warned that if the bill doesn’t reach a full Senate vote before May, the midterm election cycle will make major legislation politically untouchable. The Senate will recess for five weeks starting in early August, after which campaign season will be in full swing. Should Democrats regain the House in November, the bill could be shelved until 2027 or even 2030. According to Polymarket data, the probability of passage has dropped from 82% in February to 47%.
Projected Industry Impact: If the Bill Passes or Fails
If the CLARITY Act passes, it will bring three substantial changes to the U.S. digital asset industry. First, the division of regulatory authority between the SEC and CFTC will be enshrined in federal law, providing permanent legal grounds for asset managers like BlackRock and Fidelity to launch crypto products. Second, decentralized projects that meet quantitative criteria such as the "20% voting power" threshold can qualify as commodities, thus avoiding the SEC’s stringent disclosure requirements. Third, non-custodial software developers will be exempt from the definition of "money transmitter," ensuring the legality of open-source development within the U.S.
If the bill fails, regulatory uncertainty will persist for at least two more years. The current model of "regulation by enforcement" will continue, and more talent and capital will flow to jurisdictions with clearer frameworks, such as Singapore and Abu Dhabi. The crypto-friendly policies advanced by the Trump administration could be reversed after the midterms, ushering in a new wave of regulatory uncertainty for the industry.
Conclusion
The CLARITY Act has entered its final legislative window for 2026. The combined pressure from Trump and Bessent has injected political momentum, but the stablecoin yield provision remains the core obstacle in the Senate. Banking industry lobbying, industry divisions, and ethical controversies together form a complex matrix of interests. The mid-May markup will be the pivotal moment: if passed, the U.S. crypto regulatory framework will be formally established; if missed, the process could be delayed for years. For industry participants, the coming weeks will be critical in shaping the future of U.S. crypto regulation.
Frequently Asked Questions
Q: What’s the difference between the CLARITY Act and the GENIUS Act?
The GENIUS Act, signed into law in July 2025, established a federal regulatory framework specifically for U.S. dollar stablecoin issuance and reserve management. The CLARITY Act covers a broader digital asset market structure, including asset classification, the division of SEC and CFTC jurisdiction, exchange registration standards, and legal responsibilities for DeFi participants. It’s considered the "full version" compared to the GENIUS Act.
Q: What exactly does the stablecoin yield provision restrict?
The core restriction in the Senate’s revised draft is a ban on "passive holding yield"—that is, earning interest or rewards simply by holding a stablecoin balance. However, "activity-based rewards" are permitted, including payment incentives, trading rewards, and platform usage incentives. The SEC, CFTC, and Treasury will jointly define the legal boundaries for such activity incentives.
Q: How does the bill divide SEC and CFTC jurisdiction?
Sufficiently decentralized digital assets are classified as "digital commodities" and fall under exclusive CFTC jurisdiction. Early-stage assets with fundraising characteristics are regulated by the SEC. The bill also sets quantitative criteria: only when the issuer and affiliates’ combined voting power is under 20% can an asset be recognized as a commodity.
Q: What’s the current legislative status of the CLARITY Act?
The bill passed the House in July 2025 by a vote of 294 to 134 and is currently stalled in the Senate Banking Committee. The Senate markup has been postponed from April to May. The bill must still go through committee review, a 60-vote full Senate passage, reconciliation between House and Senate versions, and finally the President’s signature.
Q: What happens if the bill doesn’t pass?
If not passed before the 2026 midterms, crypto legislation may be delayed until the next Congress. The current "regulation by enforcement" model will persist, and more talent and capital will continue to flow to overseas jurisdictions with clearer regulatory frameworks. The U.S. could see its global competitiveness in the crypto industry further eroded.
