The probability of passing this year is only 50%. Can the CLARITY Act succeed before the midterm elections?

Translation / Odaily Golem (@웹3_골렘)

As the 119th Congress’s agenda quickly approaches, 암호화폐currency market structure legislation is nearing its final stages.

The CLARITY Act passed the House in July 2025 with strong bipartisan support (294-134) and has been the focus of intensive Senate negotiations since January. The Senate Committee on Banking, Housing, and Urban Affairs is expected to announce a markup hearing this week, likely during the last week of April.

Committee Chairman Tim Scott (R) stated that three key issues remain unresolved: the stablecoin yield provision, the DeFi provision, and securing the votes of all Republican committee members. Additionally, other outstanding issues, including the treatment of non-custodial software developers under the Blockchain Regulatory Certainty Act, ethics provisions related to 암호화폐 holdings by government officials, and matters concerning the SEC, could further complicate the path forward.

Following passage in the Senate Banking Committee, the bill still needs to secure 60 votes on the Senate floor, be reconciled with the Agriculture Committee’s version and the House-passed bill, and finally be signed by the President. Each step takes time, and the legislative calendar is rapidly shrinking: the CLARITY Act must compete for limited Senate floor time with debates over Iran military authorization, an unresolved Homeland Security funding impasse, and a backlog of nominations.

On Monday, Punchbowl reported that Senator Thom Tillis (R-NC), a key negotiator on the Senate Banking Committee, called for delaying the committee’s markup until May. If the markup is pushed past mid-May, the bill’s chances of passage in 2026 drop significantly. Senator Cynthia Lummis (R-WY) warned that failure to pass this year could delay market structure legislation until 2030 or later.

Galaxy believes the probability of the CLARITY Act being signed into law in 2026 is roughly 50%, or possibly lower. This uncertainty stems not from any single issue, but from the multitude of unresolved questions that must be addressed sequentially under severe time constraints.

Treasury Secretary Scott Bessent (left) has called for a markup of the CLARITY Act. Senate Banking Committee Chairman Tim Scott says three big issues remain.

CLARITY Act Progress Review

The Digital Asset 시장 Transparency and Clarity Act of 2025 (CLARITY Act) passed the U.S. House of Representatives on July 17, 2025, by a vote of 294 to 134. All 216 voting Republicans voted in favor, with none opposed and 4 abstaining. Among Democrats, 78 voted in favor, while 134 voted against.

The bill was introduced by House Financial Services Committee Chairman French Hill (R-AR) on May 29, 2025, and passed a joint markup of the Financial Services Committee (47-6) and the Agriculture Committee (32-19) on June 10.

The overwhelming House vote reflected a broad consensus on the urgent need for a federal regulatory framework for digital assets. The bill clearly delineates jurisdictional boundaries between the SEC and CFTC, establishes a “mature blockchain test” to determine if certain cryptocurrencies are securities, creates a path for token networks to be treated as non-securities upon achieving sufficient decentralization, and, for the first time, brings digital commodity intermediaries under federal registration and anti-money laundering obligations. The Senate Banking Committee released its draft in July; the bill was introduced in the Senate on September 18 and referred to the Banking Committee.

In the Senate, work on the CLARITY Act has proceeded in parallel. The Agriculture Committee released a discussion draft in November and, on January 29, advanced the Digital Commodities Intermediary Act, which primarily focuses on the CFTC’s regulatory authority over digital commodity markets including spot markets, to committee consideration.

Additionally, on January 12, the Senate Banking Committee, chaired by Tim Scott with Elizabeth Warren as Ranking Member, released a 278-page alternative substitute (ANS) as a base negotiating text for committee work. This text goes well beyond the House-passed bill, encompassing nine titles covering securities innovation, illicit finance, decentralized finance, banking, software developer protections (the Blockchain Regulatory Certainty Act, or BRCA), customer property protections in bankruptcy, and other matters.

The bill was originally expected to be brought to the Senate floor for a vote in mid-January but was delayed due to disagreements over stablecoin yield restrictions. A second attempt at a vote was also canceled. Before the CLARITY Act can go to the Senate floor, the Banking Committee and Agriculture Committee versions must be reconciled, and the combined bill must then be reconciled with the House version, all before being sent to the President.

Since January, the primary obstacle to the bill’s advancement has been the dispute between banks and cryptocurrency companies over stablecoin rewards. (The GENIUS Act, signed into law last year, prohibits stablecoin issuers from sharing yields directly with holders but allows exchanges to pay rewards to users holding stablecoins on their platforms; banks want to ban such incentives.) On March 20, Senators Thom Tillis (R-NC) and Angela Alsobrooks (D-MD) announced a framework agreement brokered by the White House. The agreement would ban yields earned solely for holding stablecoins but allow clearly 디파이ned rewards tied to activities like payments, transfers, or platform usage.

Since David Sacks left in March, Patrick Witt, Executive Director of the President’s Council of Advisors on Digital Assets, has been the White House’s lead on crypto legislation. He called the compromise durable and confirmed that some previously thorny issues have been resolved behind the scenes. Crypto industry representatives reviewed the text on March 23, finding its language too restrictive; Coinbase initially opposed it but changed its position on April 10 after Treasury Secretary Scott Bessent publicly called for amending the bill and the exchange’s CEO, Brian Armstrong, expressed support.

On April 8, the White House Council of Economic Advisers (CEA) released a 21-page analysis concluding that a complete ban on stablecoin yields would only increase bank lending by $2.1 billion (0.02% of total outstanding loans) while increasing consumer costs by $800 million. The report weakened the banking industry’s core argument that unchecked stablecoin yields pose a structural threat to deposits. As of press time, Chairman Scott has not yet announced a markup date.

He told Fox Business on April 14 that three issues remain unresolved: the stablecoin yield provision, the DeFi provision, and securing the votes of all Republican committee members. Senator Tillis, responsible for releasing the revised yield text, said last week it was unlikely to be released this week and on Monday called for delaying the markup until May. A markup cannot be scheduled until the text is released and the committee’s required 48-hour notice period expires.

U.S. Senator Thom Tillis is a key negotiator on the Senate Banking Committee

The Importance of Passing the CLARITY Act Before the Midterms

The CLARITY Act provides a significant and lasting legislative foundation for the digital asset industry: classifying different types of digital assets and their regulatory treatment, clarifying market watchdog jurisdictions, protecting non-custodial developers, and granting the Treasury new powers to combat illicit finance, among other provisions.

The bill offers the legal and regulatory certainty necessary to continue the integration of crypto markets with traditional capital markets, creating conditions for modernizing U.S. capital markets and providing, for the first time, clear and substantial safeguards, disclosures, and investor protections. It resolves many lingering issues that have previously prevented institutional capital and infrastructure from entering the market or forced them offshore.

Overall, the CLARITY Act is a strong bill, both technically and politically.

Given the balance of power in the House and Senate (Republicans hold a slim majority), Galaxy believes passage and enactment of the CLARITY Act before the November midterm elections is critical. While the bill enjoys strong Democratic support (78 House Democrats voted for the CLARITY Act in 2025), a potential shift in the balance of power in the 120th Congress (convening January 2027) would drastically reduce the likelihood of this legislation passing after November 2026.

If Democrats gain a majority in one or both chambers, it would mean new committee chairs, new agenda priorities, and potentially a very different approach to crypto legislation. Specifically, the CLARITY Act in its current form is highly unlikely to emerge from a Senate Banking Committee chaired by prominent members like Elizabeth Warren or Sherrod Brown.

Sherrod Brown chaired the Senate Banking Committee in the 118th Congress but was defeated by Bernie Moreno in 2024. Sherrod Brown is currently running in a special election in Ohio in November against Republican candidate Jon Husted. Husted was appointed by Governor Mike DeWine after JD Vance resigned to become Vice President; the winner of this election serves only until 2028, underscoring how unstable the Senate’s power structure is about to become.

Brown’s prior tenure likely gives him seniority over Warren for the Banking Committee Chairmanship, though this is not entirely clear; both senators have historically been hostile to the digital asset industry’s priorities.

The CLARITY Act in its current form would be very unlikely to emerge from a future Senate Banking Committee chaired by Elizabeth Warren or Sherrod Brown.

The current bipartisan coalition formed under specific conditions: a crypto-friendly White House, a Republican Banking Committee chair, the successful passage of the GENIUS Act (demonstrating bipartisan cooperation), and the crypto industry’s active lobbying and heavy spending to elect crypto-friendly lawmakers and convert previously skeptical ones in the 2024 election cycle. These conditions may not persist in the future.

Senator Lummis has publicly warned that failure to pass the CLARITY Act this year could delay comprehensive market structure legislation until 2030 or later, as a new Congress would need to restart the legislative process from scratch, with new committee compositions and potentially very different political motivations shaping the agenda.

Even if Republicans retain their majority, political enthusiasm for complex, multi-stakeholder financial regulation could wane during a lame-duck session (Odaily note: the period after the election but before the new Congress is sworn in) or in the early months of a new Congress as leadership focuses on organizing committees, confirming nominees, and setting a new legislative agenda. Therefore, the current window is exceptionally favorable and may not reappear anytime soon.

Even without the CLARITY Act, the crypto-friendly regulatory environment might only last until the end of President Trump’s term. Regulators have already demonstrated their ability to advance the crypto industry through administrative relief, interpretive guidance, and formal rulemaking. These developments have prompted major banks, brokerages, and exchanges to take concrete steps to build blockchain infrastructure and offer digital asset services. The integration achieved by traditional capital market participants over the next two and a half years might be enough to prevent a major industry reversal, even under a future hostile administration.

However, the key issues are duration and permanence. The regulatory progress to date, including joint SEC/CFTC interpretive announcements, SEC no-action letters, and OCC guidance on bank crypto activities, exists outside statutes and can be overturned by a future administration without congressional approval.

Even without the CLARITY Act in 2026, the crypto industry might not face a crisis, but its runway could be shortened. In the long run, a comprehensive market structure bill is essential to govern the development of the digital asset industry for decades to come.

Issues in Ongoing Senate Negotiations

While the “stablecoin rewards” issue dominates headlines and is widely seen as the (perhaps only) major hurdle, several other key issues are simmering beneath the surface. Here are the main sticking points:

Stablecoin Rewards

We are awaiting the public release of the compromise text negotiated by Senator Tillis and Senator Alsobrooks (D-MD) on this matter.

Galaxy understands that the text still bans rewards earned “solely for holding” stablecoins but allows clearly 디파이ned rewards tied to activities like payments, transfers, or platform usage. If true, this is essentially similar to the agreement Coinbase explicitly rejected in January.

However, we need to see the actual text, which senators have kept under wraps. The White House CEA report from April 8, stating that a complete ban on yield-bearing crypto would only increase bank lending by $2.1 billion (0.02% of total outstanding loans) while increasing consumer costs by roughly $800 million, significantly undermined the banking industry’s argument about deposit outflows.

The American Bankers Association rebutted almost immediately, arguing the CEA analyzed the wrong question by only studying the impact of the current ~$300 billion stablecoin market without modeling a future where yield-bearing stablecoins grow large enough to compete substantively with the banking sector’s $18 trillion deposit base. The framing of the argument differs markedly, and the definition of the analytical scope will likely determine the final outcome.

Coinbase’s CEO reversed the company’s opposition to the bill on April 10, seemingly clearing what was previously the industry’s biggest obstacle. The text may not have changed materially from the version Coinbase rejected in January, but the political calculus has shifted: Bessent’s public pressure, the CEA report, and Coinbase’s pending national bank charter application (which could subject the company to federal regulatory pathways regardless of the bill’s final outcome) may all have influenced Coinbase’s change of heart.

Nevertheless, the underlying commercial tension between exchanges and banks over stablecoin yields remains.

Blockchain Regulatory Certainty Act (BRCA)

Codified as Section 604 of the Senate Banking Committee’s ANS, BRCA clarifies that software developers and infrastructure providers who do not hold or control user funds are not money transmitters under the Bank Secrecy Act.

The crypto industry considers this provision a red line and essential for ensuring open-source development remains in the U.S. The provision faces opposition from law enforcement and strong bipartisan pushback within the Senate Judiciary Committee. In January, Judiciary Committee Chairman Chuck Grassley (R-IA) and Ranking Member Dick Durbin (D-IL) co-signed a letter to Banking Committee Chairman Scott and Ranking Member Warren opposing the inclusion of BRCA in federal law.

They argued the Banking Committee was unilaterally amending Title 18 of the U.S. Code (specifically 18 U.S.C. § 1960, which prohibits unlicensed money transmission) without consulting the committee responsible for federal criminal law. They warned the provision could create “blind spots” for state and local law enforcement agencies that rely on FinCEN registration information to track money flows when investigating potential money laundering, terrorist financing, and drug and human trafficking.

Furthermore, Catherine Cortez Masto (D-NV), former Nevada Attorney General and Banking Committee member, has been pushing for amendments to address law enforcement concerns. The National Sheriffs’ Association and the National District Attorneys Association have also weighed in, warning that the bill’s DeFi provisions could limit prosecutors’ ability to pursue financial crime cases.

The crypto industry counters that BRCA does not modify anti-money laundering statutes under 18 U.S.C. §§ 1956 and 1957; does not limit prosecutions for fraud or sanctions evasion; and merely codifies FinCEN guidance and the Department of Justice’s recently clarified position that truly decentralized, non-custodial software does not constitute money transmission.

Satisfying the demands of Chairmen Grassley and Cortez Masto without substantially weakening the provision is one of the toughest negotiations in the bill.

Ethics Amendment

Democrats have sought to include provisions in the bill that would prohibit senior government officials, elected officials, and their immediate family members from holding or profiting from crypto assets while in office. This topic directly targets the various crypto projects involving the Trump family and has been a Democratic priority throughout the negotiations.

This issue was not included in the Senate Banking Committee’s January ANS draft, but multiple Democratic senators have indicated they will push for an ethics amendment during the committee markup or on the Senate floor. While unlikely to be a roadblock in committee, it could become a flashpoint during floor debate, where any senator can offer an amendment and Democratic votes will be needed to reach 60.

SEC Exemptive Authority

Section 505 of the Senate Banking Committee’s ANS draft deals with the tokenization of securities and other real-world assets. Some market participants and former regulators argue this provision overly restricts the SEC’s ability to use its exemptive and no-action relief tools to foster innovation in digital asset markets.

Simply put, many fear the provision could render the SEC’s “innovation exemption” process unwork

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