Just when U.S. crypto supporters think they’ve extinguished one digital asset market structure fire, new blazes ignite, and the smoke is making the finish line even harder to see.
The Senate Banking Committee has yet to schedule a markup session for its CLARITY Act digital asset market structure bill, despite recent claims that the long-running stablecoin ‘yield/rewards’ fight between crypto stakeholders and the banking sector had been resolved.
On April 21, Sen. Thom Tillis (R-NC) poured cold water on hopes that Banking would hold a markup session this month, suggesting May was a far better bet. Tillis, who has been working with fellow Committee member Angela Alsobrooks (D-MD) on a bipartisan stablecoin compromise (the text of which has yet to be made public), said more time was needed to ensure all stakeholders’ views received ample consideration.
Accordingly, stakeholders on both sides of this debate have been airing their concerns/grievances with Banking members. Crypto In America’s Eleanor Terrett reported that the North Carolina Bankers Association asked their employees to call Tillis to insist on “an airtight prohibition” of digital asset platforms like Coinbase (NASDAQ: COIN) offering “any interest or yield-like payments tied to the holding, retention, or balance of payment stablecoins—without carve-outs that can be met through nominal activity or loyalty programs.”
The American Banking Association has been running ads in Politico, urging voters to “protect local lending while embracing innovation” by telling senators to “close the stablecoin loophole.” On April 16, the Consumer Bankers Association joined the list of banking groups pushing back against the White House Council of Economic Advisers’ report that claimed allowing stablecoin rewards wouldn’t negatively impact banks’ ability to issue new loans.
On April 17, Patrick Witt, the White House’s adviser on all things crypto, tweeted that it was “hard to explain any further lobbying by banks on [the yield v reward] issue as motivated by anything other than greed or ignorance. Move on.”
Meanwhile, the Digital Chamber sent Banking leaders a letter on April 20 urging them to schedule a markup session “as soon as the calendar allows,” noting that it had been 270 days since similar legislation was approved by the House of Representatives.
A similar letter was sent jointly on April 23 by the Blockchain Association and the Crypto Council for Innovation, citing the support of over 120 crypto stakeholders. The letter claimed, “timely action is critical, as other major jurisdictions have already implemented comprehensive frameworks, and the absence of comparable U.S. policy risks ceding both economic and strategic advantages.”
With April out of the running, the earliest that Banking could take up the CLARITY torch would be the week of May 11. Crypto advocates fear that a failure to seize the initiative ASAP could push a final Senate floor vote into mid-summer, perilously close to the August recess, when many members of Congress shift their attention from legislation to the November midterm elections.
On April 22, Galaxy Digital’s head of research, Alex Thorn, noted that CLARITY will also need to be sent to the House for reconciliation with its own market structure bill. Thorn said, “The odds of CLARITY being signed into law in 2026 are roughly 50-50, and possibly lower.” As of Tuesday evening, April 28, the odds of CLARITY being signed into law this year have slipped to just 46% on the Polymarket prediction betting site, down from 65% on April 17.
Putting the ‘ic’ in ethics
The stablecoin question is just one of the unresolved questions preventing CLARITY’s advance. Among the thorniest issues is the one involving ‘ethics,’ aka the desire by (mostly) Democrats to limit/prohibit elected officials—including President Trump—and their families from profiting off crypto ventures over which they exert some control/influence.
The Dems’ ethics push got a bipartisan boost on Monday as Politico quoted Sen. Tillis saying, “there has to be ethics language in the bill before it leaves the Senate, or I’ll go from one of the people working on negotiating it to voting against it.” It’s unclear exactly when Tillis found his ethics spine, but it’s worth noting that his comments came after the president welcomed the largest holders of his $TRUMP memecoin to his Mar-a-Lago resort on Saturday, April 25.
Decrypt’s Sander Lutz was at Saturday’s event, which was billed as a ‘gala luncheon’ featuring a speech by the president. The event’s guests were described as “predominantly foreign,” and “at least half of the attendees appeared to have flown in from Asia.” Democrats have previously suggested Trump’s crypto ventures leave him open to at least the appearance of selling access to individuals (foreign and domestic) who open their wallets for his digital asset projects.
Sure enough, the company that issued $TRUMP just found a new way to boost token sales. The $TRUMP Coin Club is offering “invitation-only luxury suites at the biggest sporting events in the world, private dinners, and the most elite and extraordinary experiences.” Similar to the luncheon and last year’s inaugural $TRUMP dinner held at a Trump-owned golf club, the new ‘Club’ perks are based on how many tokens an individual holds and how long they’ve held them.
Even some prominent crypto supporters, such as Moonrock Capital founder Simon Dedic, have begun characterizing the president’s crypto ventures as “the biggest obstacle to crypto regulation right now.” Dedic said Trump is “actively sabotaging the legislation this industry needs most, just to further fill his own bags.”
Back to the top ↑
DeFi devs’ pursuit of ‘get out of jail free’ cards looks iffy
Another CLARITY obstacle is the question over how much legal protection the bill should offer developers of decentralized finance (DeFi) platforms when said platforms are used by bad actors. DeFi proponents have pushed to incorporate language from an earlier standalone bill, the Blockchain Regulatory Certainty Act (BRCA), into CLARITY to ensure that developers don’t face legal blowback when criminals use the platforms to launder the proceeds of crime.
Several U.S. law enforcement groups have protested these proposed protections on the grounds that they would make it harder to prosecute crypto crooks. Another group, the Fraternal Order of Police (FOP), added its voice to this mix on April 21, informing Banking’s leaders of its “strong opposition” to the DeFi protections, “which would limit the ability of prosecutors to pursue cases of financial crimes in which cryptocurrency is used.”
The FOP warned that “criminal organizations, which already rely on these types of currencies, would find it even easier to commit crimes if this provision is adopted. Make no mistake, stripping law enforcement of its ability to track blockchain financial transactions would impede the work of our members in preventing criminals from profiting from their crimes. We are urging the Committee to reconsider this amendment, in order to ensure our officers aren’t working with their hands tied behind their backs.”
The anti-immunity position got a further boost on Tuesday when Politico quoted Sen. Tillis saying, “We need to address the law enforcement concerns.” Tillis, who is becoming a real thorn in CLARITY’s side, said DeFi proponents “always use the one example of a developer that’s getting swept up in it. Let’s figure out how we fix that so if it is legitimately an innocent developer, it’s one thing—but not necessarily assume they’re all angels.”
It’s worth noting that the U.S. Department of Justice (DoJ) appears dead set on retrying Tornado Cash co-founder Roman Storm on charges of conspiracy to launder money and evade U.S. economic sanctions. Storm was convicted last August of conspiracy to operate an unlicensed money transmitting business, but the jury deadlocked on the two more serious charges. On April 24, U.S. District Court Judge Katherine Polk Failla issued an order for both sides to prepare for “a re-trial in this case” to begin on October 26.
Senior DoJ figures previously appeared to hint at the agency’s willingness to look the other way in cases in which there was no evidence that a DeFi developer “knew of the specific legal requirement and willfully violated it.”
This position appeared to gain additional support on Monday, when acting Attorney General Todd Blanche dialed into a ‘Code is Free Speech’ panel at the annual BTC conference in Las Vegas. Blanche said, “The basic principle is that if you are developing software, if you are a coder, if you are part of that process and you are not the third-party user and you are not helping and knowing the third party is using what you develop to commit crimes, you are not going to be investigated and not going to be charged.”
However, Blanche qualified that “facts matter because if you’re laundering money or violating sanctions, the mere fact that you happen to be a coder doesn’t excuse you from criminally liability.” Blanche appeared to allude to the Storm situation by saying “there’s some lingering cases that are very fact-specific and very procedurally complicated … those cases are something that we’re continuing to deal with.”
This explanation didn’t comfort DeFi supporters like Peter Van Valkenburgh, exec director of the Coin Center advocacy group, who tweeted that “enforcement posture is not legal clarity.” Van Valkenburgh cited the case of developer Michael Lewellen, who recently lost a bid to pre-emptively protect himself from prosecution over a ‘privacy-protecting’ fundraising platform he’s yet to launch.
Van Valkenburgh said developers “should not have to guess how a future prosecutor will answer” important questions, including “where DOJ draws the line between publishing noncustodial software and ‘helping’ or ‘knowing’ about a bad user.” Van Valkenburgh urged Congress to “pass the BRCA safe harbor unmodified” and “commit to a binding interpretation of the law not just discretionary non-prosecution.”
Back to the top ↑
PACs on the attack
With all these potential tripwires blocking CLARITY’s path to Trump’s desk, it’s reasonable to assume the crypto sector will soon start flexing its lobbying muscles hard. And by muscles, we mean the cash backing the multiple political action committees (PACs) formed to ensure politicians feel the heat for opposing the sector’s desire for limited oversight.
In Ohio, the Sentinel Action Fund has committed to spending “more than $8 million” in the state supporting incumbent Sen. Jon Husted against his challenger, former Ohio Senator Sherrod Brown. Brown, a renowned crypto critic who previously served as Banking Committee chair, was famously ousted from the Senate in 2024 after Fairshake spent $40 million electing his opponent Bernie Moreno.
Sentinel has received $750,000 in funding from the Solana Policy Institute, plus another $250,000 from Multicoin Capital. Sentinel called Brown a “radical Democrat” who “stood in the way of pro-innovation policies when it comes to digital assets” while supporting “extreme-left policies on open borders, government fraud and handouts to illegals, and submission to the trans agenda.” Alrighty, then…
On April 9, the Fellowship PAC, an offshoot of stablecoin giant Tether, offered its first endorsements of multiple candidates (all Republicans) at both the state and federal levels. On April 23, Fellowship issued two more endorsements (both Republicans) for Rep. Barry Moore’s bid for an Alabama Senate seat and Lindsey Graham’s quest to be re-elected as senator for South Carolina.
Federal Election Commission (FEC) filings show Fellowship has received $1 million in funding from an affiliate of Anchorage Digital (in which Tether has a $100 million stake, plus the two firms collaborated on the USAT stablecoin). Another $10 million came from Wall Street firm Cantor Fitzgerald (NASDAQ: ZCFITX), which claims to custody the over $122 billion in U.S. Treasury bills backing Tether’s USDT stablecoin. The family of Cantor founder (and current Commerce Secretary) Howard Lutnick has also received significant loans from Tether.
The Fellowship’s disbursements to date total $3 million (all on Republicans), leaving it with just under $8 million on hand. Last September, Fellowship claimed to have $100M+ earmarked for spending in the midterms, although it later filed FEC paperwork showing it had zero dollars at its command. Whether Anchorage, Cantor, or any other crypto Daddy Warbucks will come forward with the other ~$90 million as the election talk heats up remains to be seen.
Last week, Axios reported that Fellowship had halted plans to spend $1.75 million on ads backing Ken Paxton’s bid for the Senate seat currently held by John Cornyn (R-TX). Senior GOP officials reportedly contacted Lutnick to urge him to hold off on the outlay, citing President Trump’s lack of an endorsement for either candidate. Trump’s 2024 campaign co-manager Chris LaCivita tweeted that the Fellowship’s planned spending was “not a smart move.”
The winner of the Cornyn-Paxton tilt will face off against Dem nominee James Talarico, who is polling better than either GOP candidate. Talarico currently holds no rating on the Coinbase-backed Stand With Crypto (SwC) astroturf group. Paxton is similarly unrated while Cornyn holds an ‘A’ rating, indicating a ‘strongly supportive’ stance on digital asset issues.
Meanwhile, the Fairshake PAC, whose primary backers include Coinbase, Ripple Labs, and the Andreessen Horowitz (a16z) (NASDAQ: ZADIHX) venture capital group, has over $193 million left to spend after splashing out $13.2 million in the current election cycle (most of that in a losing cause in the Illinois Senate primary race).
Fairshake’s party-specific offshoots Protect Progress (pro-Dem) and Defend American Jobs (pro-GOP) have so far spent $8.8 million and $5.8 million, respectively. While those two groups have spent over $2.5 million supporting Texas candidates, they have yet to open their wallets for any candidate for the open Senate seat.
Back to the top ↑
Watch | MiCA and the Future of Stablecoins: What Comes Next for Tether?
Source: https://coingeek.com/clarity-act-stablecoin-impasse-causing-defi-ethics-concerns-grow/
