U.S. Senate Banking Panel Publishes 309-Page "CLARITY Act" Crypto Draft

Shortly after midnight on Tuesday, May 11, 2026, the Senate Banking Committee released the full 309-page text of the CLARITY Act, setting the stage for a Thursday hearing that could propel the most ambitious U.S. effort yet to define crypto market structure. At the center of the draft is a sweeping requirement for payment stablecoins: issuers would have to back every token 1:1 with high-quality liquid assets. The bill also attempts to pull stablecoin issuers, DeFi builders, institutional custodians, and banks into a single regulatory system—an approach that satisfies none perfectly but aims to establish a workable baseline. A second pillar draws a bright jurisdictional boundary between the SEC and the CFTC. Oversight would hinge on whether a token operates like a security with ongoing, management-led profit expectations or functions as a digital commodity within a decentralized protocol. The absence of a clear statutory split since Bitcoin's launch has been a key obstacle for regulated fiduciaries seeking institutional custody approvals. While the bill leaves some gray areas, it would create a minimum legal framework compliance teams say is necessary before investment committees will commit capital. What the 1:1 reserve rule would require The draft limits eligible reserves to short-dated U.S. Treasuries (under 90 days), overnight repurchase agreements, and central bank deposits—tighter than what much of the market uses today. Tether's USDT disclosures have historically included assets such as corporate paper, money market funds, and secured loans, which would not qualify under this proposal. Circle's USDC has already moved toward short-duration Treasuries and cash, leaving it better positioned for compliance. On stablecoin yield, the language is narrow. It allows interest or yield only if paid "solely in connection with the holding of payment stablecoins" or structured to be economically equivalent to interest on a bank deposit. Coinbase CEO Brian Armstrong said Monday that "not everyone got everything they wanted, but they got the must-haves." Armstrong added that Coinbase is working with at least five of the largest global banks, describing the outcome as workable and emphasizing cooperation with banks. Banks push back; Galaxy counters The American Bankers Association is pressing senators to tighten the bill further, warning that yield-bearing stablecoins could pull funds from insured deposits and disrupt mortgage funding. Galaxy Digital research disputes that premise, arguing stablecoin expansion will largely be driven offshore and that "foreign capital will flow into U.S. banking infrastructure at a rate that materially exceeds any domestic deposit migration." If Senate lawmakers accept that framing, the reserve mandate becomes a channel for foreign dollar demand into U.S. Treasuries rather than a direct threat to U.S. bank deposits—undercutting the ABA's case and raising the odds the current yield language remains. Senate Banking Committee Chairman Tim Scott called the bill "serious, good-faith work" that "puts consumers first, combats illicit finance" and "keeps the future of finance" in the U.S. The biggest political obstacle: ethics Opposition led by the committee's top Democrat, Elizabeth Warren, is focused less on reserves or agency jurisdiction and more on the absence of an ethics provision. Warren said Trump and his family have "raked in at least $1.4 billion in gains from crypto deals alone" in his first year and argued the bill includes "zero provisions" to prevent conflicts of interest. Because the conflict-of-interest language falls outside the Banking Committee's jurisdiction, it would need to be added later. Democrats, including Senator Kirsten Gillibrand, have said they will not allow the bill to advance without it. Senate passage also requires 60 votes, meaning the measure needs meaningful Democratic support to clear the chamber. What happens next—and the timeline The draft must still be reconciled with a version approved by the Senate Agriculture Committee, the ethics provision must be negotiated and inserted, and then 60 senators must vote in favor. White House adviser Patrick Witt has set July 4 as the administration's target date; Gillibrand has suggested the first week of August. A Thursday committee vote could keep those timelines intact if both parties agree on ethics language. If the conflict-of-interest issue becomes a deal-breaker, the framework would slip—and institutional allocations waiting on statutory classification would remain on hold.