This article (below) highlights an intra-party dispute within the Republican Senate caucus regarding whether the CLARITY Act, a 616-page bill that creates a comprehensive regulatory system for digital commodities, will roll back provisions from last year's stablecoin law. That bill (https://www.congress.gov/bill/119th-congress/senate-bill/1582) was a regulatory framework for payment stablecoins. Opponents felt it did not do enough to protect banks by ensuring crypto enterprises do not offer rewards that mimic traditional interest and thus prevent widespread flight from local banking to crypto markets. Those opponents want the draft language for the CLARITY Act to address this problem more thoroughly.
But: This is not a new issue. And this is not the main issue stalling progress on the matter. Concerns over payments were a major point of contention from the beginning of discussions on CLARITY. A bipartisan compromise on the issue was announced back in May by Sens. Thom Tillis (R-N.C.) and Angela Alsobrooks (D-Md.) that bans rewards “on a payment stablecoin balance in a manner that is economically or functionally equivalent to the payment of interest or yield on an interest-bearing bank deposit.” The compromise has appeased most Senators, but as long as the wider issue is in discussion interest groups--specifically local and independent bankers--keep advocating.
The real hurdle now is ethics. Senate Democrats are particularly concerned about the Trump family crypto dealings, and will not agree to legislation until they are satisfied that any gains that Trump will possibly generate have been curbed. Should this deal come together, any GOP holdouts on the interest issue will be more than made up for by Democratic supporters jumping on board.
The Senate will begin procedural votes on the CLARITY Act when they return to session the week of September 14th. The crypto industry is anticipated to spend millions on the November elections against those who they perceive as harming their industry. Meanwhile, various agencies and regulators are beginning to move on crypto controls in the absence of law (more on that later!). These pressures should motivate Senators to find a solution.
