Senate Panel Unveils CLARITY Act Draft With Stablecoin Limits

The Senate Banking Committee released revised CLARITY Act text on May 12 ahead of a scheduled May 14 markup. The draft would limit passive yield on payment stablecoins, clarify protections for decentralized finance developers, and create a statutory path for banks and eligible credit unions to offer certain crypto services.

Section 404 would bar covered digital asset service providers and their affiliates from paying U.S. customers passive interest or yield on payment stablecoin balances. The bill would still allow activity-based rewards tied to transactions, payments, platform use, staking, governance or loyalty programs. The SEC, CFTC and Treasury would have authority to define allowable activity-based incentives.

The text preserves protections for non‑custodial software developers, validators and infrastructure providers through language drawn from the Blockchain Regulatory Certainty Act. The draft specifies that creating or maintaining code, validating transactions or providing computational work does not make those participants money transmitters solely for those activities. Criminal liability would remain for actors who knowingly transfer funds tied to unlawful activity. The draft also states that routine governance actions and limited cybersecurity responses by decentralized systems do not automatically establish centralized control.

Section 401 would give national banks, state banks, financial holding companies and eligible credit unions a clearer statutory basis to use digital assets and blockchain technology for activities they already conduct, including payments, custody, lending and trading. Those activities would have to fit within permissible banking functions and remain subject to prudential supervision.

Other market-structure provisions direct the SEC and CFTC to issue joint rules for portfolio margining, update recordkeeping standards to account for distributed ledger systems, and establish coordination mechanisms across tokenized securities, digital commodities and intermediaries. The draft creates a disclosure regime for certain network tokens labeled as ancillary assets, treating those tokens as commodities while requiring initial and semiannual disclosures for covered transactions and setting a rebuttable presumption that a token is ancillary unless certified otherwise.

On customer property and insolvency, the bill would treat ancillary assets and digital commodities as customer property in Chapter 7 liquidation and establish an insolvency safe harbor for digital commodity transactions similar to protections in conventional derivatives and securities markets. The draft would require the SEC and CFTC to produce educational materials on digital assets and mandate disclosures about how digital commodities and payment stablecoins would be treated if a broker-dealer fails.

The legislation includes a CFTC‑SEC micro‑innovation sandbox, an SEC‑CFTC memorandum of understanding, an advisory committee on digital assets, voluntary post‑quantum cryptography standards and expanded funding for the Financial Crimes Enforcement Network. The bill would authorize $30 million per year for FinCEN for five years and allow the agency to offer salary premiums to recruit qualified staff.

The release shifts negotiations into a public committee process. If the Banking Committee approves the draft, it would still require additional negotiations before reaching the full Senate. Republican negotiators have suggested the measure could reach the White House before July 4.

Political disagreement remains over ethics rules for federal officials. The latest text does not include restrictions on the president, vice president, members of Congress or senior officials from profiting from digital asset ventures while participating in crypto policymaking. Several Senate Democrats have tied their support to such ethics provisions.

Sen. Thom Tillis described the revised language as “a bipartisan compromise that will provide regulatory certainty needed to foster innovation,” and expressed expectation that Congress would pass the bill and send it to the president soon. Sen. Elizabeth Warren criticized the omission of ethics rules, warning that “any crypto legislation that doesn’t shut down this presidential corruption and protect investors isn’t worth the paper it’s written on.”