What is the progress of the Clarity Act? What are the key points of contention?

Deng Tong, Jinse Finance

Recently, U.S. Treasury Secretary Scott Bessant publicly criticized Coinbase on Fox News as a "stubborn participant" because Coinbase opposes the CLARITY Act. Bessant repeatedly emphasized the necessity of passing the CLARITY Act at last week's Senate Banking Committee hearing, using strong language against its opponents.

What is the progress of the CLARITY Act? This article outlines the timeline of the CLARITY Act and discusses its core points of contention.

I. Timeline of the CLARITY Act

• In 2023, the House Financial Services Committee first introduced the draft "Digital Asset Market Structure Act," the core of which was to define the concept of "digital goods," attempting to resolve the jurisdictional dispute between the SEC and CFTC. However, it failed to reach a vote due to opposition from the SEC and resistance from Democrats.

  On May 29, 2025, House Financial Services Committee Chairman French Hill, along with bipartisan members, submitted a draft of the "Digital Asset Market Clarity Act," the core of which is to distinguish between "digital commodities" (regulated by the CFTC) and "digital asset securities" (regulated by the SEC), eliminating long-standing ambiguity in digital asset regulation. On June 9, 2025, the "Blockchain Regulatory Certainty Act" was incorporated into the CLARITY Act, strengthening blockchain-related regulatory rules. Several prominent blockchain and cryptocurrency organizations issued a joint statement welcoming the inclusion of the "Blockchain Regulatory Certainty Act" in the new CLARITY Act. The updated bill, based on FinCEN 2019 guidelines, clarifies that developers and infrastructure providers who do not control customer funds should not be regulated like money transferors. On June 11, 2025, the House Financial Services Committee and the Agriculture Committee passed the bill, which then proceeded to a full House vote. On June 23, 2025, the House Financial Services Committee and the Agriculture Committee submitted the bill, which defines digital goods as digital assets whose value is "intrinsically linked" to the use of blockchain. On July 17, 2025, the House of Representatives passed the CLARITY Act with 294 votes in favor and 134 against, and sent it to the Senate for consideration. This bill became one of the important crypto regulatory bills in the United States. On January 12, 2026, Senate Banking Committee Chairman Tim Scott released a bipartisan revised text, strengthening the criminal liability of stablecoin issuers and refining the "blockchain maturity" verification process. On January 15, 2026, Coinbase publicly opposed the CLARITY Act. Brian Armstrong stated that after reviewing the Senate Banking Committee's draft crypto bill, Coinbase could not support this version of the legislation. Key issues include: a de facto ban on tokenized stocks; restrictions on DeFi, granting the government unlimited access to personal financial records and weakening privacy rights; weakening the CFTC's authority, stifling innovation, and subordinating it to the SEC; and amendments that could stifle stablecoin reward mechanisms and allow banks to block competitors. Armstrong pointed out that the draft bill is "worse than maintaining the status quo," preferring no bill to a bad one, but he remains optimistic about reaching a more reasonable version through continued collaboration and emphasized that the crypto industry should receive the same regulatory treatment as traditional finance in the United States. On February 4, 2026, a closed-door meeting of the US Senate Democrats was held to restart discussions on the CLARITY bill and improve its support base in the Senate (market predictions indicated a rise in support). According to a Democratic staffer, the atmosphere of the meeting was "positive," and the meeting was "arguably the most productive meeting the Democrats have ever held." Senate Majority Leader Schumer attended the meeting and delivered a speech, emphasizing the importance of industry participation and urging all parties to maintain momentum and push for the relevant legislation to be implemented. Despite the clear demands raised by the senators, the core message of this meeting is that this legislation, which was thought to be on the verge of being shelved just weeks ago, is far from over.

II. The Core Controversies of the CLARITY Act

1. Restrictions on Stablecoin Yields

The bill prohibits non-bank entities (such as cryptocurrency exchanges) from paying "passive yields" to stablecoin holders, allowing only licensed bank deposit accounts to pay interest. This is seen by the banking industry as a key provision to prevent deposit outflows, but it has severely impacted stablecoin-related revenue for platforms like Coinbase.

Banking groups argue that stablecoin products offering yields are similar to deposit-taking or unregulated investment vehicles. Cryptocurrency companies, on the other hand, argue that such programs are more like the points rewards or payment incentives common in the fintech sector.

The American Bankers Association (ABA) points out that one of its priorities this year is "to prevent payments for stablecoins from becoming a substitute for deposits, thereby cutting into community bank lending by prohibiting payments of interest, yields, or rewards (regardless of the platform)."

Bank of America CEO Brian Moynihan once believed that up to $6 trillion could flow from banks to interest-paying stablecoins. Circle CEO Jeremy Allaire dismissed concerns that stablecoin yields could trigger bank runs, calling them "completely absurd": "They help increase user stickiness and attract customers." 2. Allocation of Regulatory Power The biggest selling point of the CLARITY Act at the legislative level is its attempt to end the years-long regulatory tug-of-war between the SEC and CFTC in one fell swoop through "asset classification." The bill divides digital assets into "digital commodities" (regulated by the CFTC) and "digital asset securities" (regulated by the SEC). Hybrid assets are coordinated by both agencies, but Democrats worry about the CFTC's limited resources and insufficient enforcement, favoring SEC leadership, while Republicans support CFTC dominance in the spot market, creating partisan and institutional divisions. The CLARITY bill does indeed grant the CFTC a more defined jurisdiction: it transfers the regulatory power over the spot market for "digital goods" to the CFTC; it acknowledges that some decentralized assets should not be automatically considered securities; and it attempts to limit the SEC's enforcement space over "mature" blockchain networks. However, the key issue is that the SEC's power has not been truly reclaimed. The Senate version retains the SEC's de facto "final interpretation right" in several ways: it introduces highly subjective judgment criteria (such as "blockchain maturity" and "continuous reliance on the efforts of others"); it allows the SEC to re-intervene when it discovers "securities characteristics"; and it does not explicitly prohibit retroactive enforcement. 3. Regulatory Requirements and Privacy Protection The CLARITY bill requires DeFi protocols with a controlling shareholder to register as securities intermediaries and comply with rules such as Anti-Money Laundering (AML) and Customer Due Diligence (CDD). Systems without a single controlling shareholder are subject to lighter regulation, but crypto fundamentalists believe this will destroy the core value of DeFi as "permissionless and privacy-preserving." III. What are the next steps for the CLARITY Act? Many analysts warn that if lawmakers delay or block the CLARITY Act, it will prolong regulatory uncertainty, which they say could trigger a cryptocurrency market downturn, affecting not only stablecoins but also the overall crypto market. For DeFi and retail investors, the real test lies in whether the relevant legal exemptions and self-custody protections remain effective after the Senate drafts the bill and the House and Senate reach an agreement. The House's wording regarding self-custody and peer-to-peer transfers is already clearly defined in the current text. This lays the foundation for evaluating subsequent versions, which may narrow wallet permissions by defining intermediary services or compliance triggers. The exceptions for DeFi provide another point of reference, but their actual effectiveness may depend on how lawmakers and regulators define "DeFi activity," "control," and intermediary roles. This implementation risk is particularly important if stablecoin rewards are subject to broad regulation. In this context, even if the returns themselves do not originate from the stablecoin issuer's balance sheet, access channels, custodian institutions, and interfaces can become bottlenecks for users to obtain similar returns. The US legislation also faces challenges from global benchmarks, as at least one major jurisdiction has already imposed restrictions on the "interest" of certain crypto asset tokens. The EU's Crypto-Asset Market Regulation provides a reference for restricting similar interest returns in certain stablecoin categories. US lawmakers face a dilemma: on the one hand, they must follow a restrictive model, and on the other hand, they must allow for the establishment of reward channels to provide cash management functions for native cryptocurrency applications and fintech distribution. IV. What do industry insiders think? Senator Cynthia Lummis, a supporter of crypto: "The U.S. will not stand idly by—we lead the way. The Clarity Act ensures that the U.S. continues to lead the way in the digital asset space, rather than standing on the sidelines and letting other countries set the rules. Let's show the world what true American leadership looks like with a president who supports the crypto industry and is ready to sign the bill." U.S. Treasury Secretary Scott Bessenter: He harshly criticized those in the crypto industry who are hindering the progress of the Clarity Act. He called some opponents "nihilists," arguing that they would rather have no regulation than accept the current "very good regulation" bill. Both Bessenter and Democratic Senator Mark Warner expressed frustration with the legislative deadlock. Warner described himself as "in crypto hell" and emphasized that the bill's focus is on national security and DeFi vulnerabilities. Bessant warned that the bill is "indispensable" for the development of the US crypto industry, and any market participant who doesn't want it "should move to El Salvador." He also stated that both parties are expected to push the bill through "this year." Bitwise Chief Investment Officer Matt Hougan: "The CLARITY Act is like Punxsutawney Phil in this crypto winter. If it just peeks out and fails to pass Congress, the 'winter' may continue; but if it passes and is signed into law, the crypto market could very well reach a new all-time high." Goldman Sachs CEO David Solomon: Many Goldman Sachs employees are highly focused on issues including the US Congress's CLARITY Act, as it could have a significant impact on tokenization and stablecoins. He expects the bill to have a long way to go before it makes progress, but he does believe these innovations are crucial. Cardano founder Charles Hoskinson expressed skepticism about the passage of the U.S. Digital Asset Markets Clarity Act in the first quarter of 2026 and called for the resignation of David Sacks, the Trump administration's head of cryptocurrency affairs. Hoskinson pointed out that since Sacks took the position in late 2024, cryptocurrency prices have fallen, regulations have lacked clarity, and the industry has failed to build a solid foundation for development. He believes that if the bill fails to pass this quarter, Sacks should resign, stating that he has "let down the entire industry." Hoskinson also stated that the bill is even less likely to pass if Democrats regain control of the House of Representatives in the November midterm elections. He criticized current U.S. crypto policies for favoring large financial institutions rather than retail investors and for centralizing the industry in Wall Street institutions such as BlackRock, Goldman Sachs, and Morgan Stanley. Furthermore, Hoskinson reiterated that Trump-related cryptocurrency projects have caused market chaos, emphasizing that cryptocurrencies should remain global and neutral, rather than nationalized or politicized. He advocated for lasting and unrestrictive crypto regulations in the U.S., even if it takes longer.