CLARITY Act Clears Senate Banking Committee Markup as Stablecoin Yield Compromise Holds
The Senate Banking Committee gaveled open the most consequential markup in U.S. digital asset history on May 14, 2026, convening at 10:30 a.m. ET in Room 538 of the Dirksen Senate Office Building to vote formally on the Digital Asset Market Clarity Act of 2025 , known as the CLARITY Act . All 13 Republican committee members confirmed their support before the session began, with Senator John Kennedy of Louisiana, the only credible GOP holdout, announcing he would vote in favor, making passage out of the 24 member panel certain regardless of Democratic participation. [1][2] Markup Day Mechanics The committee processed over 100 filed amendments before reaching a final vote on the 309 page Amendment in the Nature of a Substitute released at 12:25 a.m. on May 12 by Chairman Tim Scott (R SC). [3][4] The substitute text, expanded from a 278 page January draft, reflected months of negotiation on four tracks: stablecoin yield restrictions, DeFi developer protections under the Blockchain Regulatory Certainty Act (BRCA) , law enforcement carve outs, and housing supply policy incorporated as a Kennedy aligned sweetener through the Build Now Act . [3] Scott had stated publicly that he needed both unanimous Republican support and meaningful Democratic crossovers to give the bill credible footing for the Senate floor, where passage requires 60 votes. The May 14 session was the first formal committee vote on CLARITY after two previously cancelled markups and an aborted September 2025 effort. [4] The Tillis Alsobrooks Stablecoin Yield Compromise The centerpiece of the May substitute is a substantially rewritten Section 404 , renamed from January's permissive "Preserving Rewards for Stablecoin Holders" to the more restrictive "Prohibiting Interest and Yield on Payment Stablecoins." The revision embeds the March 20 agreement between Senators Thom Tillis (R NC) and Angela Alsobrooks (D MD), the first bipartisan breakthrough on the stablecoin yield dispute. [3][5] The core mechanism adds a second prohibition covering payments on a stablecoin balance "in a manner that is economically or functionally equivalent to the payment of interest or yield on an interest bearing bank deposit." Activity based rewards remain fully permissible: transactions, liquidity provision, governance voting, staking, loyalty programs, and subscription incentives are enumerated explicitly. Subsection (c)(3)(B) preserves the right for permissible rewards to be calculated by reference to balance, duration, or tenure. [3] Additional structural changes include Treasury joining the SEC and CFTC as a joint rulemaker, a $5 million per violation civil penalty , and a 90 day good faith cure period. [3] The White House Council of Economic Advisers published a 21 page analysis in early April finding that a full stablecoin yield ban would increase bank lending by only $2.1 billion , or 0.02 percent of outstanding loans, materially undercutting the deposit flight argument. [3] "We respectfully agree to disagree." Senator Thom Tillis, posted on X after acknowledging the banking industry would not be fully satisfied with the yield language [1] Bank Lobby Pushback The American Bankers Association , Bank Policy Institute , Consumer Bankers Association , Financial Services Forum , and Independent Community Bankers of America issued a joint statement on May 4 crediting Tillis and Alsobrooks for setting the right policy goal while declaring the language fell short. The coalition argued that allowing rewards calculated by reference to duration, balance, and tenure through exchange membership programs created a significant loophole. [5] "Senators Tillis and Alsobrooks are seeking to achieve the correct policy goal, prohibiting the payment of yield and interest on stablecoins; however, the proposed language falls short of that goal. Research demonstrates that yield earning stablecoins could reduce all consumer, small business, and farm loans by one fifth or more, making it essential for the prohibition to be clear and transparent." Joint statement from the American Bankers Association and four co signatories, May 4, 2026 [5] The banking trades sent an eleventh hour letter on May 9 formally rejecting the compromise. Despite the pressure, Chairman Scott held the markup date. Coinbase , which had withdrawn support in January, reversed course after the March compromise. CEO Brian Armstrong cited HarrisX polling showing 52 percent voter support versus 11 percent opposition across party lines. [4][6] Democratic Ethics Demand The most significant Democratic objection was not the yield question but the absence of ethics provisions. Senators Ruben Gallego (D AZ) and Kirsten Gillibrand (D NY) stated explicitly that the bill could not advance without language barring senior government officials from personally profiting from digital assets while in office. [3][7] Senator Elizabeth Warren (D MA) cited reports that President Trump's family had earned $1.4 billion from digital asset transactions and filed more than 40 amendments before the markup. [7][8] None of the proposed ethics amendments prohibiting the president, vice president, and federal officials from certain digital asset transactions were included in the May 12 substitute. The White House indicated it would accept across the board ethics rules but reject provisions targeting specific officeholders. Chairman Scott suggested the committee's jurisdiction over ethics was limited and the issue might be deferred to the floor. [3] DeFi Developer Protections The May substitute preserved Section 604's BRCA language shielding non controlling software developers and node operators from money transmitter classification. Senator Cynthia Lummis (R WY) confirmed the developer protections were adopted into the latest draft. [6] A new subsection (d) preserves 18 U.S.C. Section 1960(b)(1)(C) for persons acting with specific intent to transfer funds known to be criminal in origin, addressing the Tornado Cash and Samourai Wallet…