The release of the long-awaited CLARITY Act has intensified debate in Washington over how the U.S. should regulate digital assets. Shortly after midnight on Tuesday, May 11, the Senate Banking Committee published the bill’s full 309-page text ahead of a key hearing scheduled for Thursday.
Under the legislation, stablecoin issuers would need to back every digital coin with an equivalent amount of highly liquid assets, effectively creating a one-to-one reserve standard designed to strengthen confidence in dollar-linked cryptos.
Another central feature of the bill seeks to settle a longstanding dispute over regulatory authority. The proposal establishes a clearer boundary between the Securities and Exchange Commission and the Commodity Futures Trading Commission. Oversight would depend on the role of a token, with assets tied to profit expectations driven by centralized management likely to be treated as securities, while decentralized digital commodities would fall under separate supervision.
The bill also introduces strict rules governing stablecoin reserves. Only select assets would qualify, including short-term U.S. Treasury securities with maturities below 90 days, overnight repurchase agreements, and deposits held at central banks. These standards are narrower than those followed by some issuers today.
This requirement could place added pressure on certain stablecoin operators. Reserve reports tied to Tether’s USDT have historically included holdings such as corporate debt, money market investments, and secured lending arrangements, categories that would not meet the bill’s proposed criteria. Circle’s USDC, however, appears better positioned for compliance after moving more heavily into cash and short-duration Treasuries.
The issue of stablecoin rewards has also emerged as a flashpoint. Lawmakers crafted language that permits interest-like payments only when directly connected to holding payment stablecoins or when structured similarly to earnings associated with a traditional bank deposit.
Speaking earlier this week, Coinbase Chief Executive Officer Brian Armstrong described negotiations over the legislation as imperfect but, ultimately practical. He acknowledged that different stakeholders had made concessions while emphasizing that key priorities remained protected. Armstrong also noted that Coinbase is in discussions with several major global banks, framing cooperation between crypto firms and financial institutions as essential to long-term success.
Meanwhile, the American Bankers Association has intensified lobbying efforts, warning senators that stablecoins offering yield could reduce insured bank deposits and disrupt mortgage financing systems.
Research released by Galaxy has challenged those concerns, arguing that much of stablecoin expansion is expected to come from international markets. According to that view, increased adoption would channel foreign capital into U.S. financial infrastructure rather than weaken domestic banking.
Political disagreements may ultimately prove more difficult to resolve than technical questions about reserves or oversight. Senator Tim Scott, chairman of the Senate Banking Committee, described the proposal as a serious effort to protect consumers, fight financial crime, and maintain U.S. leadership in financial innovation.
Critics, however, remain focused on ethical concerns. Senator Elizabeth Warren and other Democrats have argued that the legislation lacks safeguards against conflicts of interest, particularly involving public officials and crypto-related financial gains. Democrats, including Senator Kirsten Gillibrand, have indicated that additional ethics provisions will be necessary before the measure can secure enough support to pass.
The road ahead remains uncertain. Lawmakers must still reconcile the bill with a separate version approved by the Senate Agriculture Committee, finalize unresolved ethics language, and secure at least 60 votes in the Senate. The White House is reportedly aiming for passage by July 4, while some lawmakers believe early August may be a more realistic timeline. Much could depend on whether both parties can agree on the unresolved conflict-of-interest provisions before negotiations stall.
Established players like Bit Digital Inc. (NASDAQ: BTBT) in the crypto industry will be watching the progress in getting this key bill passed and signed into law in the coming months.
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