The long-awaited US crypto regulation bill has reached a critical turning point. Senate deadlock has stalled the Digital Asset Market Clarity Act of 2025, known as the CLARITY Act, raising fears of a regulatory freeze-out that could drag on until after the 2026 midterms or even 2030. Predictions from Coinbase Chief Policy Officer Faryar Shirzad are now sparking optimism that a markup could happen this month and a full floor vote in May.
The CLARITY Act would deliver the clear market structure framework the digital asset industry has demanded for years. It passed the House in July 2025 with strong bipartisan support in a 294-134 vote.
The legislation opens doors to tokenization of real-world assets such as bonds, real estate and trade finance. It also paves the way for seamless stablecoin integration in payments and creates the regulatory predictability institutions need to scale tokenized products confidently.
Why the CLARITY Act Remains Stuck in Senate Deadlock
Despite House success, the bill remains stalled in the Senate Banking Committee with no markup date confirmed as of April 17, 2026. The core conflict centers on stablecoin yield. Traditional banks and groups like the American Bankers Association warn that allowing passive yield on stablecoins could spark deposit flight, weaken the payments franchise and create unregulated shadow banking risks.
The stablecoin market has already surpassed 320 billion dollars, with forecasts reaching 1 to 2 trillion dollars. Banks view the competitive threat as existential. Crypto advocates argue that restricting yield hurts consumer returns, discourages holding dollar-pegged assets and may push capital into more volatile cryptocurrencies like Bitcoin.
Earlier negotiations explored a compromise that bans pure passive yield while permitting activity-based rewards tied to payments or platform usage.
That approach narrowed gaps but failed to fully satisfy either side, reigniting tensions and contributing to the current four-way deadlock involving Senate leadership, the crypto industry, banking lobbies and investor protection advocates.
Coinbase’s Chief Policy Officer Faryar Shirzad Shares Optimistic Crypto Update
Hope resurfaced on April 16 when Shirzad appeared Fox Business and reported that negotiators are resolving the stablecoin rewards issue.
“We are hopeful that Chairman Scott is able to schedule a markup as early as this month. Then we’ll be able to get to the floor in May and get the President and Congress another big bipartisan win“, said Shirzad.
This issue in the CLARITY Act centers on whether holders can earn passive yield (interest-like returns simply for holding dollar-pegged stablecoins) or only activity-based rewards (tied to payments, transfers, or platform usage).
Negotiations have moved toward a compromise: banning pure passive yield while allowing limited activity-based incentives.
Traditional banks, led by the American Bankers Association, strongly oppose allowing yield. They fear competitive returns (often 3-5 percent) on stablecoins could trigger deposit flight from low-yield bank accounts. This would weaken their core funding base for lending, erode the payments franchise, and create unregulated shadow banking risks without the same oversight or deposit insurance.
What Happens If the CLARITY Act Misses the May 2026 Deadline?
Time is running short, with the Senate Banking Committee needing to advance the bill by late April or early May to allow a floor vote before the Memorial Day recess and the midterm calendar crunch. Missing this window would likely push comprehensive reform into the next Congress, where political gridlock could delay passage until 2027 or beyond.
A freeze-out would extend the current era of regulation by enforcement, increasing compliance costs and deterring venture capital. Banks might gain short-term protection from stablecoin competition but would miss opportunities to modernize infrastructure, issue tokenized deposits and capture new revenue in programmable money.
Fintechs and crypto-native firms would continue operating under patchwork guidance, while the broader economy forgoes productivity gains from efficient 24/7 tokenized markets and low-cost cross-border payments.
Path Forward for CLARITY Act Passage in May 2026
A narrow path forward remains. Bipartisan senators have shown openness to refined yield language with targeted guardrails, such as limiting certain yields to institutional stablecoins or requiring bank-like capital buffers. Recent SEC-CFTC memoranda provided partial operational clarity, but statutory certainty is still viewed as essential for long-term confidence.
White House advisers have indicated technical hurdles are falling quickly. Shirzad’s optimistic predictions suggests the stablecoin rewards dispute is nearing resolution, potentially unlocking the markup process.
Author: Ruben McCarthy
See Also:
White House Slams CLARITY Act Yield Ban | Disruption Banking