US Senate's Crypto Clarity Act Faces Time Crunch, but Still Has a Chance of Survival

The prospects of the Crypto Clarity Act passing in April appear to be fading, but a possible US Senate committee hearing in May could revive the crucial market structure legislation, provided it can secure a final vote by July, according to lawmakers and lobbyists tracking the bill's slow progress. The legislative calendar is rapidly filling up, but a Senate aide noted that a brief delay to allow Republican Senator Thom Tillis to finalize discussions with bankers over stablecoin-yield concerns is not yet a fatal blow. Earlier negotiations regarding decentralized finance protections have been largely settled, leaving few obstacles to committee approval. The main hurdle the crypto industry faces is the banking sector's opposition to stablecoin rewards, but if this can be overcome, the bill still needs to clear the Senate Banking Committee, which would be only the first step in a lengthy process. The Senate will essentially recess in August and be in election mode until the November congressional midterms, with only about a dozen weeks of work scheduled before the elections, and several pressing matters competing for attention, including the funding battle over the Department of Homeland Security and clashes over the Iran war. If the bill manages to secure signoff from the Senate Banking Committee, it will need to be merged with the version passed by the Senate Agriculture Committee, a process that the current delays are encroaching upon. The final legislation is likely to undergo further revisions as lawmakers hammer out a compromise on an ethics piece aimed at limiting senior government officials from profiting from crypto interests. The aide said that language is currently being circulated, but it won't be included in the banking panel's version and will be added later. If the dispute can be resolved, along with another demand regarding the appointment of commissioners to oversee market regulation, the bill may garner sufficient Democratic support to pass. The House would then need to approve the revised bill, which is expected to be a relatively quick process, assuming no further disagreements arise. The last step, President Trump's signature, is anticipated to be the easiest, although he introduced some uncertainty in March by stating he wouldn't sign any bill until legislation requiring voters to prove their citizenship is approved. The Digital Asset Market Clarity Act, if passed, would become the second major crypto bill to become law, following last year's Guiding and Establishing National Innovation for US Stablecoins Act. However, an unresolved stablecoin matter from the GENIUS Act has delayed progress on the Clarity Act since the start of the year, as bank lobbyists have garnered sufficient support from senators to back their concerns that stablecoin rewards programs could jeopardize the banks' business model. The debate has been intense, with White House interventions and strong rhetoric from crypto insiders, including Coinbase, which stands to be substantially impacted if stablecoin reward programs are curtailed. Though key Senate negotiators had recently announced an agreement in principle to move forward with a compromise, Republican Senator Tillis told reporters that earlier hopes for April progress were likely slipping into May. The White House has leaned into the crypto position on allowing some rewards that don't resemble interest on core bank deposits. In the current version, insiders say the compromise has centered around an approach that would ban payment of yield on any product that looks or acts like insurance on a deposit, but would still permit firms like Coinbase to structure rewards programs akin to credit-card incentives. However, lawmakers have been hesitant to release text that could spark further negotiation drama, after allowing both crypto and banking industry representatives to review language last month. Every day that passes without progress reduces the odds of eventual Clarity Act success, with the very next action needing to be the scheduling of the markup hearing and the sharing of the long-awaited bill text. In other words, a single further blowup among the negotiators could be a fatal delay, although the period after the November elections could offer a final, low-odds opportunity. The so-called lame duck session of Congress at the end of the year can be a period in which the outgoing Congress can still act, and more than one crypto insider has suggested that it's not out of the realm of possibility that a hypothetically derailed Clarity Act could reappear then. While crypto lobbyists are desperate for immediate action on the legislation, the industry is playing the long game on the political front, with crypto PACs devoting millions of dollars to backing friends in Congress from both parties, and many of their political picks set to join next year's Congress. If the Clarity Act is law by then, there are likely to be other pressing legislative matters for the industry, potentially including a tax overhaul and the establishment of a federal stockpile of bitcoin.