The CLARITY Act: America finally has a crypto rulebook, if Congress can stop fighting over it
In July 2025, the US passed its first major crypto law. Signed by President Trump, the GENIUS Act gave stablecoins a legal framework for the first time. A week later, the CLARITY Act cleared the House with 78 Democratic votes, in a rare show of bipartisan support. It looked like Washington was finally getting its act together.
Then Brian Armstrong pulled the plug.
In January 2026, Coinbase’s CEO announced the company could no longer support the CLARITY Act as written. “We’d rather have no bill than a bad bill,” he said. The Senate Banking Committee postponed its markup hearing at the last minute. The bill has been stuck ever since.
Treasury Secretary Scott Bessent is not amused. “There is a group of Democrats who want to work with Republicans on getting a market structure bill. But there are a group of crypto firms who have been blocking it,” he told CNBC on February 13. He called them “nihilists” elsewhere and reportedly said anyone who doesn’t want the bill should “move to El Salvador.”
So here we are. The most significant piece of US crypto legislation in history is stalled because of a fight over whether your stablecoin should earn interest.
What the GENIUS Act actually did
Before getting to the drama, some context. The GENIUS Act is already law. It came into effect July 18, 2025. And it matters.
Stablecoins are dollar-pegged cryptocurrencies used for payments and transfers. Before the GENIUS Act, they operated in a legal gray zone. Now they have rules. Issuers must maintain 1:1 backing with US dollars or low-risk assets, no fractional reserve, with regular audits and dual federal and state supervision.
The stablecoin market has grown fast. Total market cap is now over $300 billion. USDT holds 58%, USDC about 25%. Monthly transaction volume crossed $1 trillion for the first time in September 2025. Stablecoin issuers are now the 7th largest purchasers of US government debt. This is no longer niche fintech. It’s infrastructure.
But the GENIUS Act left one fight unresolved: yield.
The $6 trillion question
Coinbase currently offers around 3.5% returns on USDC balances. Most US banks offer under 1%. The gap is not subtle.
Under the GENIUS Act, stablecoin issuers cannot pay direct interest to holders. But there’s a wrinkle. When you hold USDC on Coinbase, the legal “holder” under the relevant framework is Coinbase, not you. Circle (USDC’s issuer) pays Coinbase based on custodial balances. Coinbase distributes that as “rewards” to customers.
Banks want this arrangement closed down. They argue it’s functionally identical to paying interest and puts them at a competitive disadvantage. Bank of America’s CEO Brian Moynihan put a number on it: up to $6 trillion could migrate from bank deposits into yield-bearing stablecoins if it continues.
Crypto companies say that’s a banks problem and that customers deserve better returns. Coinbase policy head Faryar Shirzad said on CNBC that consumers “deserve” stablecoin rates. More than 250,000 messages have been sent to Congress urging lawmakers to preserve stablecoin rewards programs.
This dispute is what’s holding up the CLARITY Act.
What the CLARITY Act would actually do
If it passes, the CLARITY Act would do something decades of regulatory ambiguity prevented: give crypto companies a clear answer on which regulator they answer to.
The core idea is a three-category system. Decentralized assets like Bitcoin go to the CFTC, on the basis that their value comes from a decentralized blockchain rather than a central issuer. The trigger is a “mature blockchain” test: open-source code, transparent rules, and no single party holding more than 20% of the tokens. Tokens sold in capital raises start as securities under SEC oversight, but once they’re resold in secondary markets they automatically convert to CFTC-regulated commodities. Stablecoins are already covered under the GENIUS Act and carved out entirely.
The bill also includes a capital-raise exemption of up to $75 million in 12 months, an on-ramp for new projects. And it bans the Federal Reserve from issuing a retail CBDC. That last part is mostly a political gesture, but it signals whose coalition this bill is built for.
For crypto companies, getting this passed would mean ending a decade of guessing whether the SEC or CFTC might come after them next. Right now, operating in the US is partly just picking a regulator to fight.
How it got here, and how it nearly fell apart
The push for crypto legislation dates back to FTX’s collapse in November 2022. Sam Bankman-Fried’s arrest and billions in customer losses triggered years of congressional hearings. Earlier bills (the Lummis-Gillibrand Act, the DCCPA) failed to advance. Momentum stalled.
The shift came with the Trump administration. Paul Atkins replaced Gary Gensler at the SEC. Enforcement actions against crypto companies were dropped. Banks got clearer paths to hold crypto assets. The political environment changed completely.
“Crypto Week” in July 2025 felt like a breakthrough. The GENIUS Act signed. The CLARITY Act cleared the House. David Sacks, Trump’s White House crypto adviser, posted on X in December 2025: “We are closer than ever to passing the landmark crypto market structure legislation that President Trump has called for. We look forward to finishing the job in January!”
Then came January 2026.
After reviewing the Senate Banking Committee’s draft, Armstrong listed three objections: a de facto ban on tokenized equities, expansive government surveillance provisions, and the stablecoin yield restrictions. On January 14, he published his position. On January 15, the Senate Banking Committee postponed its markup. The timing was not coincidental.
Two White House meetings between banks and crypto industry followed, on February 2 and February 10. Neither produced an agreement.
Where it stands now
The CLARITY Act has a two-track problem in the Senate.
The Senate Banking Committee, which covers the SEC-related portions, has no new markup date. The Senate Agriculture Committee advanced a CFTC-related companion bill on January 29, but only with Republican support. Democrats withheld votes, citing Trump family crypto conflicts of interest.
To become law, the bill still needs to pass both committees, survive the full Senate (60 votes to clear the filibuster), get reconciled with the House version, pass both chambers again, and get signed. That’s a lot of steps for a bill that currently can’t even schedule a committee hearing.
Polymarket gives it a 62% chance of passing before the end of 2026, up from 53% in late January, suggesting Bessent’s intervention helped. But the hard deadline isn’t really “end of 2026.” It’s November. A Democratic takeover of either chamber in the midterms could end crypto legislation for years. Fireblocks policy director Sea Markova said market structure legislation was “at risk altogether if its passing cuts too close to the midterm elections.”
What I’m watching
I genuinely don’t know how this resolves. The stablecoin yield fight is a standoff neither side can easily walk back from. Banks have real concerns about $6 trillion in deposit migration. Coinbase has real concerns about handing incumbents a competitive moat via legislation. Bessent is trying to force a deal by publicly shaming both sides, which might work or might just harden their positions.
The Blockchain Association warned Congress in a letter that proposals to ban stablecoin rewards “risk undermining a carefully negotiated compromise, reduce consumer choice, suppress competition, and inject uncertainty into the implementation of a new law.”
Meanwhile, the GENIUS Act’s implementing regulations are due July 18, 2026, exactly one year after signing. Rulemaking is already contentious. Missing that deadline wouldn’t kill the law, but it would leave stablecoin companies in limbo for another cycle.
The frustrating thing is that the broad framework is mostly agreed upon. The CLARITY Act passed the House with 78 Democratic votes. The GENIUS Act passed the Senate 68 to 30. The appetite for crypto legislation is real on both sides of the aisle. What’s blocking it is a narrower fight about whether a yield program on USDC counts as banking.
Bessent called it “self-induced” market pain. On that, I think he’s right.
Sources: Decrypt, Disruption Banking, DL News, Morgan Lewis, Arnold & Porter, Arkham Research, Blockchain Association. Legislative status as of February 17, 2026.