The CLARITY Act Isn't Stuck on Crypto - It's Stuck on Bank Power

Zach Pandl, Grayscale's head of research, said in comments published this weekend that the CLARITY Act is unlikely to pass this year. A crowded Senate calendar and election-year politics, he said, make full passage improbable.

Early Saturday, shortly before the Senate adjourned for its summer recess, Senate Majority Leader John Thune filed cloture - the procedural move that forces a vote on whether the Senate will even debate the bill. The chamber returns September 14. The bill has a path.

Pandl may be right about timing. But the more useful question isn't whether the CLARITY Act hits September's deadline. It's why a bill that passed the House by 160 votes and cleared the Senate Banking Committee 15-to-9 in May has still not reached the floor.

The answer has almost nothing to do with crypto.

What the CLARITY Act actually does

First, a clarification, because the name does not do the bill justice. The Digital Asset Market Clarity Act of 2025 - H.R. 3633 - is a market-structure bill. It divides regulatory responsibility for digital assets between the SEC (securities) and the CFTC (commodities), sets registration requirements for digital-asset exchanges and brokers, codifies the right to self-custody, and protects non-controlling developers and infrastructure providers from being classified as money transmitters.

It also inherits stablecoin provisions from last year's GENIUS Act - the standalone stablecoin law that already became statute in July 2025 - into the broader framework.

The House passed the House version in July 2025 on a bipartisan vote of 294 to 134. The Senate Banking Committee advanced a revised version in May this year, with two Democrats crossing party lines. On paper, the coalition looked workable.

Then the Senate went into its August recess without voting. Thune told reporters late last week that Democrats insisted on no vote.

The cloture filing means September will force the question: does the bill have 60 senators behind it? If not, the bill dies for this Congress and the crypto industry spends another two years without statutory clarity. If yes, a floor vote follows - but amendments, negotiations, and a conference with the House still stand between passage and a signature.

The stablecoin yield bottleneck

The reason the bill has stalled is not that senators don't understand crypto. It's that the bill sits at the intersection of two constituency fights, neither of which is about whether Bitcoin should have a regulator.

The first is the stablecoin yield debate, and this is where banks have done the most organizing. The Bank Policy Institute, America's Credit Unions, and several other banking trade groups have been lobbying senators to prohibit passive yield on stablecoin balances - what they describe as interest-like payments that would siphon deposits away from regulated banks.

Their argument is structural, not rhetorical. If stablecoin issuers can offer yields on idle balances, they compete directly with bank deposits for the same pool of retail and institutional cash. The banking lobby points to Treasury estimates that $6.6 trillion in deposits could be at risk. Every dollar that leaves a community bank for a yield-bearing stablecoin is a dollar that can't fund a small-business loan or a mortgage. That is the claim.

The crypto industry's counter is that the current draft already bans passive yield. The latest Senate text would prohibit rewards on idle stablecoin balances while permitting incentives tied to transaction activity - spending, payments, use. Blockchain Association CEO Summer Mersinger said after the White House-mediated talks between banks and crypto firms that she was "very optimistic about where we stand and encouraged by the level of engagement from all sides". Coinbase CEO Brian Armstrong called the Senate's August failure to move the CLARITY Act "disappointing," said the industry was "closer than we've ever been," and urged lawmakers to "finish the job in September".

But here's the thing: banks don't think the ban is strict enough. The Bank Policy Institute's statement on the updated text, issued in late July, says the bill "still does not address" its shortcomings on yield and that loopholes remain. They're not satisfied with the distinction between passive yield and transaction-linked rewards, and they've signaled they will keep pushing.

The White House tried to intervene. In April, the Council of Economic Advisers released an analysis arguing that stablecoin adoption is unlikely to change the overall quantity of bank deposits - because when you withdraw cash to buy a stablecoin, the issuer reinvests those reserves in Treasuries, and the money flows back into the banking system. The CEA concluded there are "small benefits and meaningful costs" to a strict yield prohibition.

That analysis landed in the middle of the fight. It didn't resolve it.

The ethics layer

Then there's the second constituency pressure: ethics. Democrats have made it a condition of their support that the bill include restrictions on senior government officials profiting from crypto businesses. That provision became urgent - and personal - because of President Trump's expanding digital-asset ventures.

The latest Senate text now includes a ban on presidents and federal officials issuing or sponsoring cryptocurrency. A bipartisan proposal under discussion would go further, requiring the president to divest from crypto-related businesses entirely. The issue remains under negotiation between Congress and the White House, and it has become one of the primary reasons Democrats have resisted allowing a floor vote.

This is not a sidebar issue. It's leverage. Democrats are using it the way they would use any provision in any bill: as bargaining capital. The question is how much capital the Republican majority is willing to spend.

What delay actually costs

Pandl is right that the crypto industry can keep functioning without the CLARITY Act. Bitcoin has operated for roughly 17 years without comprehensive US market structure. Stablecoins are already regulated under the GENIUS Act. The SEC has issued interpretive guidance on crypto assets, and Pandl expects further rulemaking to fill gaps around tokenized securities and staking.

But he also flagged the real cost of delay: a growing share of new investment and developer activity could drift to overseas markets. Jurisdictions that offer clear rules tend to attract the next round of capital formation. Treasury Secretary Scott Bessent made the same point in a Wall Street Journal op-ed in April, arguing that the next phase of blockchain adoption - tokenized assets, decentralized exchanges, new forms of capital formation - will follow wherever clarity exists.

The Cato Institute, which has been tracking the bill closely, notes that the CLARITY Act is deeply imperfect but represents the most substantive digital asset legislation Congress has produced. Their concern mirrors Bessent's: the alternative to a flawed US framework is not no regulation. It's offshore regulation written without American input.

September as the test

When the Senate returns on September 14, the cloture process begins in earnest. Invoking cloture requires two session days to ripen, then a vote that needs 60 of 100 senators. Republicans hold the majority but are well short of 60 on their own, so they will need Democratic support to reach the 60-vote threshold.

The cloture vote won't settle the stablecoin yield dispute, the AML gaps banks want closed, or the ethics fight over presidential crypto holdings. Those disagreements would carry into floor debate, amendments, and eventually a conference with the House.

What the cloture vote will do is answer the structural question that has been hidden behind the crypto headline: does a bipartisan coalition exist for US digital-asset market structure, or is the issue too entangled with bank margin protection and executive-branch ethics to move?

If the cloture vote fails, Pandl's timeline call is confirmed. The bill dies, regulators pick up the slack, and the offshore migration accelerates.

If it passes, the real negotiations begin. And even then, the version that emerges may look very different from the one the Senate Banking Committee advanced in May.

What I'm watching is whether the stablecoin yield compromise survives intact. That provision - or its absence - is the signal of who actually won this round. Banks have been loud, well-organized, and persistent. Crypto companies have been flexible and willing to negotiate. But the final text will tell us which constituency has the leverage.

The CLARITY Act is not a bill about crypto. It's a bill about who sits between digital cash and the user. Everything else is labeling.