The Senate Banking Committee will hold its markup hearing for the Digital Asset Market Clarity Act on Thursday, May 14 at 10:30 a.m., moving the long-stalled market structure bill forward despite objections from banking industry groups who say the current text still needs work.
The scheduling announcement on Thursday represents the clearest sign yet that lawmakers are prepared to advance the legislation regardless of lingering opposition. The bill had been effectively frozen since January when Coinbase CEO Brian Armstrong announced the exchange was withdrawing support over stablecoin yield provisions.
Markup hearings are where committee members propose amendments and vote on final text before sending legislation to the full chamber. Getting to this stage means the Banking Committee believes it has the votes to advance some version of the bill, even if the final language remains unsettled.
The Yield Compromise That Broke the Logjam
The scheduling became possible after Senators Thom Tillis and Angela Alsobrooks released compromise text last week addressing the stablecoin yield question that had paralyzed progress for months. As we covered when the Tillis-Alsobrooks yield deal emerged, the new language draws a line between passive and active stablecoin holdings.
Under the compromise, crypto companies cannot offer yield on static stablecoin reserve holdings. That means simply holding USDC or another stablecoin in an account wouldn’t generate interest payments. However, the text allows rewards for stablecoins involved in activities, a carve-out that preserves business models where users earn yield by participating in lending, liquidity provision, or other on-chain operations.
This distinction matters enormously for exchanges like Coinbase and stablecoin issuers like Circle. Their yield programs often blur the line between passive savings accounts and active DeFi participation. The compromise language appears designed to prohibit the former while permitting the latter, though the Banking Committee has not released the full updated text publicly.
The yield question was always going to be contentious because it sits at the intersection of banking law and crypto innovation. Traditional banks argue that interest-bearing stablecoin accounts function like uninsured deposits, putting consumers at risk while avoiding the regulatory burden banks carry. Crypto companies counter that their yield products operate through transparent smart contracts and blockchain infrastructure fundamentally different from fractional reserve banking.
Banking Groups Push Back, But the Train is Leaving
Five major banking trade associations published a joint letter on Friday making clear they’re not satisfied with the compromise. The American Bankers Association, Bank Policy Institute, Independent Community Bankers of America, National Bankers Association, and Consumer Bankers Association wrote that “additional work is needed to arrive at text that embraces the innovation represented by digital assets while also protecting consumers.”
The letter includes specific proposed edits to the yield provision text released last week. Banking groups want tighter restrictions on what constitutes permissible “activity-based” yield versus prohibited passive yield. They’re concerned the current language could let crypto companies offer what are effectively interest-bearing accounts by simply requiring minimal user interaction.
But here’s the political reality: scheduling the markup hearing suggests lawmakers are ready to move ahead regardless of these concerns. Banking industry groups carry significant weight in Congress, particularly with the Banking Committee itself, but they’ve been raising objections to crypto legislation for years. At some point, legislators have to decide whether to wait for full industry consensus (which may never come) or advance imperfect text that can be refined through the amendment process.
The timing pressure matters too. As we explained in our analysis of the Senate calendar crunch, the Clarity Act faces a narrowing window to reach the president’s desk before midterm election season consumes congressional attention. A May 14 committee vote would put the bill on a viable path toward floor consideration in June or early July. Further delays risk pushing the entire effort into 2027.
Gillibrand’s Ethics Push Adds Another Variable
Senator Kirsten Gillibrand, who has championed crypto legislation since her early work on the Lummis-Gillibrand framework, told the audience at Consensus Miami last week that the Clarity Act needs an ethics provision. Her position: senior government officials should be barred from profiting off the crypto industry while simultaneously regulating it.
Her office doubled down Thursday, issuing a press release that cited polling data showing broad public support for such restrictions. The survey found 73% of registered voters agree that officials with regulatory authority over crypto shouldn’t maintain business ties to the industry.
Gillibrand’s push reflects growing political sensitivity around crypto conflicts of interest, an issue that has generated headlines across party lines over the past eighteen months. Whether you think existing ethics rules adequately address these concerns or believe crypto-specific provisions are necessary, the debate itself creates uncertainty about what version of the bill can actually pass.
The complication is that this ethics question may not be resolved in the Banking Committee markup at all. After Banking votes on its version, the Senate will need to merge that text with the Senate Agriculture Committee’s version before the full chamber can vote. The Agriculture Committee handles oversight of the Commodity Futures Trading Commission, which would regulate many digital assets under the Clarity Act framework. Gillibrand’s ethics provision could be addressed during that merge process rather than in Thursday’s hearing.
For traders tracking the market structure angle, check our derivatives dashboard for funding rates and positioning data that often shifts around major regulatory events.
What Actually Has to Happen for This Bill to Become Law
Thursday’s markup is necessary but not sufficient. Here’s the path forward:
First, the Banking Committee needs to vote to advance the bill. This typically involves proposing amendments, debating language, and then holding a final committee vote. If the bill passes out of committee, it moves to the full Senate.
Second, the Senate Agriculture Committee needs to complete its own markup of the bill’s commodity-related provisions. The Clarity Act spans both committees’ jurisdictions because it establishes frameworks for both securities (Banking Committee territory) and commodities (Agriculture Committee territory).
Third, those two versions must be reconciled. This is where Gillibrand’s ethics provision, and any other outstanding differences, would get resolved.
Fourth, the full Senate needs to pass the merged bill. This requires navigating floor procedures, potential amendments, and the 60-vote threshold to overcome a filibuster (assuming normal Senate rules apply).
Fifth, the House has to pass its own version and then conference with the Senate to resolve differences.
Sixth, the president signs it into law.
We’re at step one. That’s not nothing, but characterizing Thursday’s hearing as “crypto regulation is finally here” would be premature. Market structure legislation has failed before at every stage of this process.
That said, the momentum is real. Getting a markup scheduled after the bill sat dormant for four months represents genuine progress. The yield compromise appears to have brought Coinbase and other major industry players back to the table. And the political calendar creates incentives for lawmakers to move rather than wait.
The Market Structure Implications
The Clarity Act matters because it would establish which federal agency regulates which digital assets. Currently, the SEC and CFTC have overlapping and sometimes contradictory claims to jurisdiction. Bitcoin is generally treated as a commodity, but the status of most other tokens remains murky. SEC Chair Paul Atkins indicated just Thursday that the agency is considering new rulemaking for on-chain trading systems and blockchain settlement infrastructure, but those efforts exist in a policy vacuum without clear statutory guidance.
For companies operating in the U.S., jurisdictional clarity affects everything from listing decisions to compliance budgets. For traders, it determines which platforms can legally offer which products. For developers, it shapes whether building on certain protocols exposes them to securities law liability.
The stablecoin yield question specifically affects the DeFi sector because many protocols rely on stablecoins as base-layer liquidity. If the Clarity Act restricts yield on stablecoin reserves, that could push some yield-generating activity offshore or into different token structures. If the activity-based exemption is interpreted broadly, existing business models survive largely intact.
Banks, meanwhile, are watching this legislation to understand whether they’ll face new competitors operating under lighter regulatory frameworks. Their Friday letter signals they believe the current text tilts the playing field too far toward crypto companies. Whether senators agree will become clearer during Thursday’s amendment debates.
The next week will determine whether the Clarity Act actually advances or whether the Banking Committee discovers it lacks the votes to move forward. Industry observers should watch for released amendment text, senator statements on the yield compromise, and any last-minute lobbying pushes from banking groups seeking to delay the vote.
Related Reading
- Regulation news
- More on CLARITY Act
- More on Senate Banking Committee
- More on Stablecoin Yield
- More on Market Structure
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Reader note: this article is journalism, not a recommendation to buy, sell, or hold any asset. Do your own research before acting on any of it.
