U.S. Senate Banking Committee to take up the CLARITY Act May 14, spotlighting stablecoin reward limits

U.S. crypto policy is moving into another pivotal stretch. The Senate Banking Committee is set to consider the long-anticipated CLARITY Act on May 14, legislation backed by the digital-asset industry that would lay out a clearer federal framework for cryptocurrency oversight. Sen. Tim Scott, the committee's chair, said an executive session will begin at 10:30 a.m. Eastern (14:30 GMT) in the Dirksen Senate Office Building in Washington. At the center of the bill is an attempt to pull years of regulator-by-regulator disputes back into a congressional rulebook. The legislation would define how authority is split between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), an issue that has often been resolved through enforcement actions and case-by-case interpretations. It would also spell out when a crypto token should be treated as a security, a commodity, or another category—a classification that drives compliance expectations for issuers, trading venues and investors, including disclosure, listing and trading obligations. A separate provision tackles one of the most contentious issues between banks and crypto firms: whether dollar-backed stablecoins can be used in ways that resemble interest-bearing deposits. Under a compromise crafted by Republican Sen. Thom Tillis and Democratic Sen. Angela Alsobrooks, intermediaries would be barred from offering "rewards" for simply holding USD stablecoins, on the view that the practice is too similar to a bank deposit. Rewards connected to stablecoin activity such as payments and transfers would remain permissible. Banking trade groups have opposed the approach, arguing it gives crypto firms too much room to compete for funds that might otherwise stay inside the regulated, insured banking system. Lobbyists have pushed to tighten what they describe as a loophole created by legislation signed last year that permits intermediaries to pay interest on stablecoins, warning of deposit flight and financial-stability risks. Crypto companies counter that blocking exchanges and other third parties from paying yields would be anticompetitive and would shield banks' incumbent advantages. The bill's path hinges on Democratic support. Many Democrats have criticized the proposal for what they see as weak anti-money-laundering safeguards and insufficient limits aimed at preventing public officials from profiting from crypto ventures. The measure would need at least seven Democratic votes to clear the full Senate. House lawmakers passed their version of the CLARITY Act in July last year. The Senate would have to pass the bill by the end of 2026 for it to reach President Donald Trump for signature. The industry is pressing for passage in the coming months ahead of the November midterm elections, when Democrats could regain control of the House of Representatives. Trump has courted crypto-industry support and publicly pledged to be a "crypto president," while his family's own crypto initiatives have helped bring the sector further into the mainstream.