The U.S. Senate Banking Committee is on track for a mid-May markup of the Digital Asset Market Clarity Act (CLARITY Act) after Senators Thom Tillis (R-NC) and Angela Alsobrooks (D-MD) finalized a bipartisan compromise on stablecoin yield provisions on May 5, 2026. The deal prohibits stablecoin co...
"I'm very confident we're going to see the Clarity Act pass this summer at the latest." — Paul Grewal, Chief Legal Officer, Coinbase
The U.S. Senate Banking Committee is on track for a mid-May markup of the Digital Asset Market Clarity Act (CLARITY Act) after Senators Thom Tillis (R-NC) and Angela Alsobrooks (D-MD) finalized a bipartisan compromise on stablecoin yield provisions on May 5, 2026. The deal prohibits stablecoin compensation programs "economically or functionally equivalent" to bank deposit interest while preserving activity-based rewards tied to trading, staking, or platform usage.
Circle Internet Group (CRCL) closed up 19.9% to $118.11 on the news. Coinbase (COIN) gained 6.1%. Polymarket contracts pricing CLARITY Act enactment in 2026 jumped 21 points in 24 hours to 69%. White House digital-assets adviser Patrick Witt set a July 4 deadline for House passage, with the administration targeting a Senate floor vote in June.
The bill would grant the CFTC exclusive jurisdiction over digital commodity spot markets — effectively pulling Bitcoin, Ethereum, and dozens of other tokens out of SEC enforcement reach — while codifying the SEC's authority over investment contract assets. Five major banking trade groups, led by the American Bankers Association, have rejected the yield compromise, arguing that activity-based stablecoin rewards could still siphon deposits. Senators Tillis and Lummis responded: "We respectfully agree to disagree."
Section 404 of the CLARITY Act, as amended by the Tillis-Alsobrooks text released May 1, 2026, draws a regulatory line between two categories of stablecoin compensation:
Prohibited: Interest or yield on stablecoin balances structured in a manner economically or functionally equivalent to a bank deposit. This targets passive "buy and hold" yield models where users earn returns simply by holding stablecoins in an account.
Permitted: Activity-based rewards tied to measurable platform engagement — trading volume, transaction frequency, staking participation, or other "bona fide activities." Under this framework, crypto firms must restructure reward programs from a "buy and hold" to a "buy and use" model.
The compromise extends the prohibition framework beyond the GENIUS Act, which Congress passed and the President signed into law in 2025. The GENIUS Act restricted only stablecoin issuers from paying rewards. The CLARITY Act applies the yield restriction across all digital asset market participants — exchanges, custodians, and platforms distributing stablecoins.
The Crypto Council for Innovation noted the new language goes "VERY FAR beyond" the GENIUS Act scope. Circle's Chief Strategy Officer Dante Disparte called it "meaningful progress," while Coinbase CLO Paul Grewal described it as "a workable middle ground" that preserves the feature most critical to Coinbase's stablecoin distribution business.
The CLARITY Act's core structural provision grants the CFTC "exclusive jurisdiction" over digital commodity spot markets. This is the provision the crypto industry has sought since 2022: a statutory framework that removes ambiguity around whether tokens like ETH are securities or commodities.
Under the bill:
The jurisdictional clarity has already moved markets. BlackRock launched its iShares Staked Ethereum Trust ETF (ETHB) on March 12, 2026, with $107 million in seed capital. Grayscale renamed its existing ETHE product to "Grayscale Ethereum Staking ETF" in January 2026. Over 90 crypto ETF applications were pending with the SEC as of late 2025.
The bill also mandates that centralized digital asset intermediaries comply with AML/CFT and sanctions frameworks, while protecting software developers and peer-to-peer transactions from intermediary-level regulation — a distinction the crypto industry lobbied for extensively.
The market response to the yield compromise was immediate and concentrated in stablecoin-adjacent equities.
| Asset | Move | Date | |-------|------|------| | Circle (CRCL) | +19.9% to $118.11 | May 4, 2026 | | Coinbase (COIN) | +6.1% | May 4, 2026 | | Polymarket: CLARITY Act 2026 | 69% Yes (up 21 pts in 24 hrs) | May 5, 2026 |
The Polymarket contract for "Clarity Act signed into law in 2026?" had $630,600 in total volume as of May 5. The repricing closely followed Senate Banking Committee Chairman Tim Scott's April 30 comments indicating his committee was "nearing consensus" on a bipartisan markup target.
The broader stablecoin market, which reached $320.6 billion in total supply in May 2026, stands to benefit from regulatory clarity. Tether (USDT) maintains 57.96% market share at $185.5 billion. USDC, the stablecoin most directly affected by the yield compromise through Coinbase's distribution model, continues to gain share in decentralized lending and institutional settlement channels.
Additional catalysts compounded the rally: Meta rolled out USDC creator payments on Solana and Polygon during the same week, and Visa expanded the range of blockchains it uses for stablecoin settlement.
Five major banking trade groups issued a joint statement rejecting the Tillis-Alsobrooks compromise:
The groups argued that the proposed language "falls short" of the correct policy goal of prohibiting yield and interest on stablecoins. Their central claim: research demonstrates that yield-earning stablecoins could reduce consumer, small-business, and farm loans by "one-fifth or more" through deposit flight from the banking system.
The banking lobby's position is that any form of stablecoin compensation — including activity-based rewards — functions as a substitute for bank deposits and therefore threatens the lending capacity of the traditional banking system.
Senator Tillis dismissed the objection directly: "Some in the banking industry may not want either of these things to happen, and we respectfully agree to disagree." Senator Cynthia Lummis called the CLARITY Act "the priority" and declared the yield text "finalized."
According to a FinTech Weekly analysis, the banking industry's case has faced scrutiny. The CEA (Consumer Economic Analysis) report cited by the banking groups has been questioned for its methodology, and some analysts have argued the deposit-flight estimates are overstated given that stablecoin reserves are largely held in U.S. Treasuries and money-market instruments — not removed from the financial system entirely.
The CLARITY Act does not operate in a regulatory vacuum. It builds on the GENIUS Act, which the President signed after the Senate passed it 68-30 on June 17, 2025, and the House passed it 308-122 on July 17, 2025.
The GENIUS Act established that only "permitted issuers" may issue payment stablecoins for U.S. persons. Permitted issuers include subsidiaries of insured depository institutions, federal-qualified nonbank payment stablecoin issuers, and state-qualified issuers.
On April 7, 2026, the FDIC Board of Directors approved a notice of proposed rulemaking to implement the GENIUS Act:
The Office of the Comptroller of the Currency (OCC) issued parallel proposals earlier in the year. Together, the FDIC and OCC rules create the prudential layer that sits beneath the CLARITY Act's market-structure provisions.
The White House has set an aggressive legislative calendar:
| Milestone | Target Date | |-----------|-------------| | Senate Banking Committee markup | Week of May 11, 2026 | | Senate floor vote | June 2026 | | House passage | Before July 4, 2026 | | FDIC comment period closes | June 9, 2026 |
White House digital-assets adviser Patrick Witt, speaking on May 6, 2026, acknowledged the compressed timeline: "There's not a lot of slack left in the rope right now. But it is an achievable timeline."
Political obstacles remain. The Block reported on midterm election dynamics, government shutdown risks, and ongoing negotiations that could delay the bill. The Senate has four working weeks in June for floor action. Any procedural holds or amendments could push passage into July or later.
The conflict-of-interest provision is another variable. The White House pushed for a provision applying "across the board" rather than targeting any single officeholder — a response to concerns about President Trump's crypto business interests. The scope of this provision could become a flashpoint during markup.
Banking Committee Chairman Tim Scott has expressed confidence, saying the panel is "in the red zone" on reaching bipartisan consensus.
If enacted, the CLARITY Act would reshape the competitive dynamics of the stablecoin sector in several ways:
Yield model restructuring. Platforms currently offering passive stablecoin yield would need to convert to activity-based reward programs. This creates compliance costs but also creates a regulatory moat around compliant platforms.
Bank entry. With the GENIUS Act providing the licensing framework and the FDIC/OCC providing prudential rules, U.S. banks can now issue stablecoins through regulated subsidiaries. The yield compromise reduces — but does not eliminate — the competitive threat stablecoins pose to bank deposits.
Offshore issuers. The bill's yield restrictions apply to U.S. persons and U.S. market participants. Tether, domiciled outside the U.S., faces an indirect regulatory tightening as U.S.-facing platforms must comply. However, USDT's dominant 57.96% market share and its primary use case in offshore trading venues may limit the practical impact.
CFTC as primary regulator. The transfer of spot market jurisdiction to the CFTC creates a new compliance framework for exchanges. The four exchanges that recently spent $2.5 billion on CFTC license stacks (as reported separately) were positioning for exactly this outcome.
DeFi exemption boundaries. The bill protects software developers and peer-to-peer activity but requires centralized intermediaries interacting with DeFi to meet compliance standards. Where the line falls between "decentralized protocol" and "centralized intermediary" will be determined through rulemaking and enforcement.
The CLARITY Act represents the most significant potential reorganization of U.S. crypto market regulation since the SEC began asserting jurisdiction over digital assets. The stablecoin yield compromise removed the last major policy obstacle to committee markup. Whether the bill survives the Senate floor, midterm politics, and the banking lobby's continued opposition remains uncertain. Polymarket prices a 69% probability of enactment this year. The market has priced in optimism. Execution risk remains.