Senate CLARITY Act Draft Puts Crypto Market Structure Bill Into Markup

Stablecoin Reserve Rules Become a Central Piece of the Bill

The bill’s most direct stablecoin requirement is a 1:1 reserve mandate for payment stablecoin issuers. Under the draft, issuers would have to hold high-quality liquid assets against every payment stablecoin in circulation.

The reserve framework would limit qualifying assets to short-duration U.S. Treasuries under 90 days, overnight repurchase agreements and central bank deposits. That standard would create pressure for issuers whose reserve disclosures have included corporate paper, money market funds and secured loans, because those categories are described as not qualifying under the proposed framework.

Circle’s USDC is described as closer to compliance because it has already shifted toward short-duration Treasuries and cash. Tether’s USDT is described as facing more pressure under the stricter reserve asset list.

The draft also addresses stablecoin yield. It explicitly prohibits paying interest or yield on payment stablecoins, while allowing “rewards or incentives based on bona fide activities or bona fide transactions that are not economically or functionally equivalent to the payment of interest or yield on an interest-bearing bank deposit.”

A related passage says the yield language permits interest or yield payments only when made “solely in connection with the holding of payment stablecoins” or structured to be economically equivalent to interest on a bank deposit. That makes stablecoin yield one of the bill’s most heavily negotiated compromise areas.

Coinbase CEO Brian Armstrong said on Monday that “not everyone got everything they wanted, but they got the must-haves.” Armstrong also said Coinbase is working with at least five of the largest global banks and described the talks as cooperative, saying, “We want it to be win-win and work with the banks.”

The American Bankers Association is described as dissatisfied with the yield compromise and as warning senators that yield-bearing stablecoins could drain insured deposits and destabilize mortgage funding. Galaxy research pushed back, arguing that stablecoin growth will mainly originate offshore and that “foreign capital will flow into U.S. banking infrastructure at a rate that materially exceeds any domestic deposit migration.”

SEC-CFTC Split and DeFi Protections Define the Market Structure Framework

The CLARITY Act draws a jurisdictional line between the Securities and Exchange Commission and the Commodity Futures Trading Commission. The bill assigns oversight based on whether a token functions as a security tied to ongoing management-led profit expectations or as a digital commodity within a decentralized protocol.

The framework is expected to give the CFTC more authority over digital assets, shifting some responsibility away from areas usually handled by the SEC. The draft does not resolve every crypto classification gray area, but it is described as creating the statutory floor compliance teams need before institutional allocation committees can act.

The bill also includes language from the Blockchain Regulatory Certainty Act, which is intended to protect software developers from money transmitter requirements. The DeFi Education Fund said in a Monday X post that it was “encouraged by the direction of recent negotiations” over the bill and specifically pointed to the software developer protections.

The latest version also includes the Build Now Act in the final pages of the legislation. A section-by-section summary describes that measure as creating “a pilot program to incentivize housing development of all kinds in certain Community Development Block Grant participating jurisdictions.”

Ethics Fight Threatens Bipartisan Support

Senators Tim Scott, Cynthia Lummis and Thom Tillis said the bill reflected “continued negotiations with Democratic colleagues.” 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 here in the United States.”

Scott also said in a public post, “Let’s make America the crypto capital of the world.”

The most difficult unresolved issue is ethics language tied to concerns over President Donald Trump’s crypto ventures, including his memecoin and his family’s World Liberty Financial business. The current bill text does not include provisions addressing Democrats’ concerns about potential conflicts of interest linked to elected officials’ crypto ties.

Some Senate Democrats, including Kirsten Gillibrand, said they would not vote for market structure legislation on the Senate floor without clear ethics provisions. Senator Angela Alsobrooks, who sits on the Banking Committee and announced the stablecoin-yield compromise with Thom Tillis, said, “We have worked too hard on this bill to give up now.” Alsobrooks added, “My hope is to get to a bipartisan markup on Thursday with a compromise on ethics.”

Massachusetts Senator Elizabeth Warren opposed the missing ethics language, saying, “This bill puts investors, our national security and our entire financial system at risk – and it will turbocharge Donald Trump’s crypto corruption.” Warren also said, “In just one year in office, the President and his family have raked in at least $1.4 billion in gains from crypto deals alone, and yet this bill stunningly includes zero provisions to prevent that.”

The conflict-of-interest section is described as outside the Banking Committee’s jurisdiction and would have to be added later. That makes ethics language a separate but potentially decisive hurdle for the legislation.

Senate Timeline Remains Unsettled

The bill has already advanced through the Senate Agriculture Committee in a January markup, with one description saying the committee passed its version and another saying it voted along party lines to advance the measure.

The legislation still must pass the Banking Committee, pass the full Senate, be reconciled with the House of Representatives and potentially be signed into law. Even if the Banking Committee advances the bill on Thursday, it would need 60 votes to pass the Senate, meaning Republican-only support would not be enough.

The vote challenge is being compared with the GENIUS Act, a stablecoin payments bill that was under consideration in June 2025 and passed the Senate with bipartisan support in a 68-30 vote.

White House adviser Patrick Witt set July 4 as the administration’s target for the bill. Senator Kirsten Gillibrand predicted the first week of August as the likely timing.

The CLARITY Act now stands as a live legislative package built around stablecoin reserves, token classification, DeFi developer protections, bank-sector concerns and unresolved ethics demands. The Thursday markup will test whether lawmakers can move the bill forward while leaving the hardest conflict-of-interest language for later negotiations.