Take Two — The Clarity Act Heads to Markup in Senate Banking
Ahead of Thursday’s pivotal vote, last minute preparations are being made, though a big question remains: Will Democrats support it?
Welcome to the Monday edition of the Crypto In America newsletter!
What you’ll read: What you need to know heading into Thursday’s Clarity Act markup, what to watch this week, and the top stories making headlines.
It’s a pivotal week for U.S. crypto policy: The Senate Banking Committee has officially scheduled the long-awaited markup of the Clarity Act, the next step toward passing comprehensive crypto market structure legislation into law.
As Crypto In America first reported last week, Senate Banking Chairman Tim Scott (R-SC) announced the markup on Friday evening, scheduling it for this Thursday, May 14, at 10:30 a.m. ET. According to a committee memo, the final legislative text is expected to be released later today, and senators must submit any amendments before close of business tomorrow.
It’s nearly four months to the day since the first Senate Banking markup was scrapped over eleventh-hour objections from industry leaders, chiefly Coinbase CEO Brian Armstrong, who said the bill deferred too much to banks and could effectively kill stablecoin rewards programs for consumers.
Coinbase executives now appear content with where talks have landed, following months of tense negotiations between crypto and banking lobbyists, trade groups, the White House, and Senate staffers, as well as lead negotiators Senators Thom Tillis (R-NC) and Angela Alsobrooks (D-MD). But certain factions of the banking sector, particularly those with consumer-facing arms, are still mounting a last-minute stand to revise the stablecoin yield deal ahead of Thursday’s planned markup.
Banking trade groups representing some of those institutions sent a letter to Senate Banking leadership on Friday, arguing the current compromise language still leaves room for rewards programs that could replicate yield. The groups have proposed revisions that they say would go further in preventing stablecoins from functioning like interest-bearing bank deposits, and discouraging deposit flight from traditional banks, despite Tillis and Alsobrooks signaling in a statement last week that the issue had effectively been settled.
One Senate aide who reviewed the letter described the effort to Crypto In America as “pretty milquetoast.” They noted lawmakers on both sides of the aisle have largely shifted their attention to resolving other outstanding issues in the bill, particularly ethics language, suggesting the banking holdouts may struggle to gain traction in reopening the debate. Still, the issue could resurface once the legislation reaches the Senate floor, where the banking groups may try to win over senators not on the Banking Committee.
Over the weekend, Rob Nichols, president and CEO of the American Bankers Association, sent an email to member bank CEOs urging them to take immediate action ahead of the markup, encouraging them to call Senate offices, mobilize employees, and send letters through an online advocacy portal.
“We believe that committee members may not be fully aware of the risks to the economy posed by the stablecoin loophole,” Nichols wrote in the missive viewed by Crypto In America. “Your immediate engagement can make a difference.”
While the yield issue is unlikely to prevent lawmakers from supporting the bill at the committee stage, ethics is a different story. Some market analysts already anticipate the legislation to advance on party lines, with no Democrats on the committee expected to vote in favor, citing insufficient protections against conflicts of interest tied to President Trump and his family’s crypto dealings.
Senators Adam Schiff (D-CA) and Ruben Gallego (D-AZ) have been leading the charge on that issue, and Schiff is said to be particularly dug in as of late. Gallego has emerged as an advocate for both the crypto industry and advancing the Clarity Act more broadly, but it remains unclear if he will break with Democrats on the issue — one that is increasingly becoming a focal point for the party.
Another key Democrat to watch is Nevada Senator Catherine Cortez Masto, who has been deep in the weeds, negotiating DeFi provisions like the Blockchain Regulatory Certainty Act (BRCA) and Section 1960.
According to industry sources, Senator Chuck Grassley (R-IA), chairman of the Senate Judiciary Committee, is expected to weigh in on proposed changes to the text that would prohibit safe harbors for software developers who knowingly facilitate money laundering, following concerns raised by law enforcement groups.
Sources say Grassley’s approval could help alleviate some of Cortez Masto’s concerns, though it remains unclear whether she’ll ultimately vote yes on Thursday. Senator Mark Warner (D-VA), another key negotiator on DeFi, will also be one to watch.
The good news for the crypto industry, and the banks that want to finally get access to crypto, is that the bill can still advance out of committee on a partisan vote. But opinions are mixed on whether that may ultimately weaken its chances in the full Senate. Some, like Galaxy Digital’s Head of Firmwide Research Alex Thorn, believe a strictly GOP committee vote could make it harder to secure the Democratic support needed to reach the 60-vote threshold on the floor.
“While it’s possible the bill could still succeed if it advances through Senate Banking on a partisan basis, the odds of ultimate Senate passage are certainly diminished if no Democrats vote in favor during committee markup on Thursday,” Thorn told Crypto In America.
Others are less concerned, arguing the remaining issues can be worked out before the legislation reaches the Senate.
“There’s been a lot of pessimists throughout this process at every stage,” said one crypto lobbyist. “This bill would be dead by now if there wasn’t bipartisan will to get it done. Every outstanding issue is very surmountable so long as that will remains.”
Let’s see what Thursday brings.
👀 What To Watch This Week
As Congress returns from recess, it’s shaping up to be a notable week not only for crypto policy, but also for key inflation data and corporate earnings.
Monday
Circle (CRCL) and Sharplink (SBT) report earnings pre-market.
The Senate returns.
Bermuda Digital Finance Forum begins. Crypto In America will be on the ground.
CleanSpark (CLSK), Exodus (EXOD) and Bakkt (BKKT) report earnings post-market.
Tuesday
EToro (ETOR), TON Strategy (TONX) report earnings pre-market.
The House returns.
6:00 a.m.: The National Federation of Independent Business will release its Small Business Optimism Index, offering a fresh read on the health and sentiment of small businesses nationwide.
8:30 a.m.: The Bureau of Labor Statistics releases the Consumer Price Index (CPI) for April, a key measure of inflation.
Wednesday
Digital Assets Week kicks off in New York City.
8:30 a.m.: Another inflation read with the release of the Producer Price Index (PPI) for April.
BitGo (BTGO) reports earnings post-market.
Thursday
Bullish (BLSH), Bitdeer (BTDR) report earnings pre-market.
10:30 a.m.: The Senate Banking Committee will hold a markup of the Clarity Act.
The Tax Council Policy Institute will host fireside chats with two key figures shaping digital asset tax policy: Senator Ron Wyden (D-OR) at 9:50 a.m., and House Ways and Means Committee Chair Rep. Jason Smith (R-MO) at 11:25 a.m.
7 p.m.: Federal Reserve Governor Michael Barr discusses the Fed’s balance sheet in New York.
Rumble (RUM), Gemini (GEMI) report earnings post-market.
Friday
Likely Jerome Powell’s final official day as Chair of the Federal Reserve.
Weekend News Flash
ICYMI: The biggest headlines from Friday and the weekend.
Circle raised $222 million in a pre-sale round for its L1 Arc token from BlackRock, Apollo Global Management and Andreessen Horowitz at a $3 billion valuation. The stablecoin issuer also reported higher quarterly revenue, which it attributed to increased adoption and circulation of USDC.
Strategy CEO Phong Le said the company may sell Bitcoin under certain conditions, echoing similar comments made by Executive Chairman Michael Saylor last week. The company also disclosed today that it purchased 535 BTC for $43 million.
Truth Social parent company, Trump Media & Technology Group, reported a $405 million net loss in Q1, driven in part by its crypto holdings.
Payward, the parent company of Kraken, has applied for an OCC trust charter in a bid to become a federally regulated crypto bank.
SEC Chair Paul Atkins said the agency is exploring new rules for onchain trading, including frameworks for exchanges, brokers and crypto yield products.
Coinbase posted nearly $400 million in losses as Q1 revenue fell 31% to $1.41 billion, with the company attributing the decline to slower trading activity amid the crypto bear market. It also announced it would be reducing its workforce by 14%.
Ondo Finance, in partnership with JPMorgan Chase, Mastercard and Ripple, completed a near-real-time cross-border redemption of its tokenized U.S. Treasury fund OUSG on the XRP Ledger, underscoring the potential for 24/7 global financial rails.
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