CLARITY (May 2025 – December 2025): While the GENIUS Act addresses the infrastructure security issues of stablecoins, the CLARITY Act (HR 3633) focuses on the broader and more complex secondary market structure of crypto assets, token taxonomy, and the delineation of regulatory jurisdiction. A Breakthrough in the House and a Reshaping of Jurisdictional Boundaries: On May 29, 2025, French Hill, Chairman of the House Financial Services Committee, along with the House Agriculture Committee and several bipartisan members, formally introduced the CLARITY Act. The fundamental aim of this act is to eliminate the long-standing chaos of "regulation by enforcement" in the US crypto market, providing predictable legal certainty for entrepreneurs, investors, and the market. The CLARITY Act implements a bold division of jurisdiction in its structure. The bill explicitly grants the Commodity Futures Trading Commission (CFTC) exclusive jurisdiction over the spot market for "digital commodities," while retaining the Securities and Exchange Commission's (SEC) jurisdiction over digital assets classified as investment contracts. To accommodate this massive emerging market, the bill directs the CFTC to establish a comprehensive registration mechanism specifically for digital commodity exchanges, brokers, and dealers, and introduces "provisional status" to allow existing market participants to continue operating legally during the compliance transition period. At the House of Representatives level, the bill garnered significant bipartisan support. On July 17, 2025, the day before the GENIUS bill was signed by the president, the CLARITY bill passed the House with an overwhelming majority of 294 votes in favor and 134 against. This victory masked underlying conflicts of interest, and the market is generally optimistic that the U.S. will establish a comprehensive crypto regulatory framework by the end of 2025. Contagious Effects: The Expansion of the Commodity Pool Definition and the Compliance Challenges of DeFi It's worth noting that the CLARITY Act, in revising the Commodity Exchange Act (CEA), introduced a far-reaching provision. The Act brought spot trading of "digital commodities" under the category of "commodity interest activity." Under traditional financial regulatory frameworks, only transactions involving derivatives (such as futures, options, and swaps) trigger regulatory recognition of "commodity pools"; spot market trading (such as buying and selling physical gold or crude oil) is not subject to this restriction. The CLARITY Act breaks down this boundary.This means that any investment fund, collective investment vehicle, or even liquidity pool and corporate treasury management company engaged in spot digital asset trading, as long as it involves the centralized management and trading of "digital commodities," may be legally classified as a "commodity pool." The direct consequence is that the operators and advisors of these entities must register with the CFTC as Commodity Pool Operators (CPOs) or Commodity Trading Advisors (CTAs) and comply with the National Futures Association's (NFA) extremely stringent disclosure, compliance, auditing, and margin requirements. This extremely stringent associated compliance cost foreshadows a forced assimilation process where crypto-native asset management models will fully converge with traditional Wall Street financial standards. The Senate's multi-track approach and undercurrents: As the House bill was transferred to the Senate, the complexity of the legislation increased exponentially. The Senate did not directly adopt the House text but instead began an internal power and interest restructuring. In the latter half of 2025, two parallel legislative tracks emerged in the Senate: On one hand, the Senate Agriculture, Nutrition, and Forestry Committee, under the leadership of Chairman John Boozman, drafted and advanced the Digital Commodity Intermediaries Act, based on the portion of the House Clarity Bill concerning CFTC jurisdiction. This draft focused on establishing a regulatory framework for digital commodity intermediaries in the spot market for the CFTC, emphasizing segregation requirements for client funds and conflict of interest protection, and received preliminary approval from the committee at the end of January 2026. On the other hand, the Senate Banking, Housing, and Urban Affairs Committee was drafting a more comprehensive amendment bill that included banking innovation and consumer protection. It was during the committee's closed-door consultations that the lobbying power of traditional banks began to exert its full force, establishing the blocking of "interest-bearing stablecoins" as its core strategic objective. This laid the groundwork for the legislative crisis that erupted in early 2026. Senate gridlock and full-scale clash of interest groups (January 2026) Entering 2026, US crypto legislation ushered in a highly dramatic turning point. On January 12, the Senate Banking Committee officially released a 278-page draft amendment to the CLARITY Act (Title I, also known as the "Lummis-Gillibrand Responsible Financial Innovation Act of 2026"). In Chapter 4, "Responsible Banking Innovation," the draft provides extremely strict definitions and restrictions on reward mechanisms for stablecoin holders. The Banking Committee is attempting to completely close the loopholes left by the GENIUS Act through legislation, proposing to prohibit digital asset service providers from offering interest or returns to users who "passively hold" stablecoins.The traditional banking industry's systemic defense logic and macroeconomic anxieties: Traditional financial lobbying groups, represented by the American Bankers Association (ABA), the Banking Policy Institute (BPI), the Consumer Bankers Association (CBA), the Independent Community Bankers Association (ICBA), and the Credit Union, have shown unprecedented vigilance and hostility towards interest-bearing stablecoins. Their core argument is not simply profit competition, but a systemic defense based on macroeconomic financial stability and the credit transmission mechanism of the real economy. The table below compares in detail the core arguments and underlying logic of traditional banking and the crypto industry on the issue of interest-bearing stablecoins: Coinbase's strong countermeasures and the legislative standstill: Faced with the devastating yield ban in the Senate Banking Committee's draft bill, the crypto industry reacted exceptionally strongly. Coinbase, the largest cryptocurrency exchange in the US, took extreme countermeasures in mid-January. Its CEO, Brian Armstrong, publicly announced the withdrawal of support for the CLARITY bill, stating bluntly that the current state of the draft amendment is "worse than maintaining the status quo (i.e., no clear legislation)." Coinbase's tough stance is not bluff, but a necessary choice to defend its fundamental survival. Financial reports show that in the third quarter of 2025, Coinbase's net revenue from stablecoins (primarily USDC issued through the Centre Alliance, established in partnership with Circle) reached $243 million, accounting for 56% of its total net revenue for the quarter. This revenue-sharing model, based on the risk-free rate of return of underlying dollar assets, has become the core cash flow for crypto exchanges to withstand cyclical fluctuations in trading volume. If the CLARITY Act forcibly cuts off this funding artery, it will not only severely damage the valuations of publicly traded crypto companies but also completely overturn the existing competitive landscape of the industry. Coinbase's public break has triggered a political domino effect. Because digital asset legislation relies heavily on fragile bipartisan consensus, the division within the crypto industry directly shakes the political foundation for the bill's passage. Faced with continued opposition from key Democrats and a reconsideration of the interests of community banks by some Republicans, Senate Banking Committee Chairman Tim Scott (a Republican from South Carolina) was forced to indefinitely cancel the scheduled CLARITY Act markup meeting and voting process at the last minute in mid-to-late January, choosing to suspend its progress to avoid the embarrassing situation of the bill being rejected at the committee stage. As a result, comprehensive digital asset legislation in the United States has been severely paralyzed. A complete record of the White House's emergency intervention and high-pressure negotiations (February 1-20, 2026): Faced with major technology and financial strategic legislation that could collapse entirely due to a single issue, the White House took unprecedented direct intervention in February 2026.With the November 2026 midterm elections fast approaching, the Biden administration and the Treasury Department are well aware that if a bill cannot be signed before the spring congressional recess, the legislative agenda is highly likely to be completely stalled amid the political polarization of the election cycle. Against this backdrop, Patrick Witt, executive director of the President's Digital Assets Advisory Council, has taken on a difficult mediating role, engaging in intensive shuttle diplomacy between traditional finance and emerging crypto capital. The following is a timeline and insider details of the White House mediation in February 2026, compiled based on information disclosed by various parties: As of February 20, 2026, with the March 1st deadline looming, the success or failure of US crypto regulatory legislation hinges entirely on whether traditional banking capital and emerging crypto capital can devise a profit balance model within the next ten days that can both protect grassroots deposits from devastating siphoning and maintain the innovative vitality of the crypto ecosystem. A Breakthrough Theoretical and Legal Framework: Yield Neutrality and Residual Risk Assessment Model As White House negotiations stalled, an internal draft discussion document—the Digital Markets Restructure Act of 2026—leaked in late January 2026 by the SEC's Crypto Task Force and related interagency drafting committee, offered a profound and highly self-consistent new regulatory paradigm for resolving the deadlock surrounding interest-bearing stablecoins. The draft's proposed theories of "yield neutrality" and "residual risk assessment" fundamentally overturned the nearly century-old logic of financial product classification in the United States. A Cornerstone for Breaking Monopolies: The Yield Neutrality Principle Article 205 of the draft aims to fundamentally break the outdated mindset that "paying interest necessarily equates to bank deposits or securities." This legal provision establishes a groundbreaking "yield neutrality" principle: Decoupling from the privileges of banking licenses: The draft explicitly stipulates that the act of providing yields, interest, or economic returns through digital assets or stable-value instruments is legally considered "neutral." The distribution of such yields "must not be restricted, conditionalized, or exclusively reserved for issuance by the depository institution (i.e., traditional commercial banks) or its affiliates." This directly negates the core demand of banks to monopolize interest-earning rights at the legal level. A strict conditional licensing mechanism: Granting interest-earning rights to non-bank institutions is not a laissez-faire approach.Non-bank entities holding the proposed Unified Registration Certificate (URC) are permitted to offer or facilitate stablecoin yields, but must strictly adhere to four unwavering compliance prerequisites: Extreme Transparency: The underlying logic of the stablecoin and its yield mechanism must be fully and publicly disclosed in the Unified Digital Market Registry. Legitimate Origin: The true physical or coded source of the yield must be clearly defined and demonstrated to the public. The yield must originate from a clearly legitimate mechanism, such as risk-free interest rate spreads managed by the underlying Federal Reserve, value backing from compliant assets, genuine secondary market transaction fees, or transparent underlying blockchain protocol operations (such as staking yields). Controlled Risk Classification: The yield instrument and its transmission mechanism must be subject to the classification and dynamic monitoring of the residual risk assessment model established by the bill. Absolute Prohibition of False Endorsements: Any marketing rhetoric implying or explicitly stating that the stablecoin's yield is guaranteed by the U.S. government's "full trust and credit" or protected by the Federal Deposit Insurance Corporation (FDIC) system (unless it is actually covered by such an insurance program). Statutory Priority and Preemption: This provision, through federal legislation, explicitly declares its validity to supersede and take precedence over any existing laws that could be interpreted as granting exclusive rights to profit distribution to banks (directly targeting potential restrictive provisions in the GENIUS Act), achieving a complete decoupling of legal application. Disrupting the Howey Test: The Residual-Risk Assessment Model. If the "yield neutrality principle" solves the qualification problem of "who is qualified to distribute profits," then the "residual-risk assessment model" outlined in Sections 103 and 202 of the draft fundamentally solves the technical challenge of "how regulators should scientifically assess and quantify the management of these interest-bearing instruments." For a long time, the SEC has relied excessively on the "Howey Test," established in 1946, to determine whether crypto assets are securities. This rigid approach has led to endless litigation. The Reorganization Act, however, completely abandons static judgments based on "technical labels" (such as stablecoins, smart contracts, and tokens), shifting to a modular and dynamically responsive regulatory mechanism based on underlying risk vectors. The core concept of this model is to measure “residual risk” – that is, the investment risk, leverage risk, or market integrity risk that still exists after all mitigation measures such as blockchain cryptographic verification, immutable smart contracts, and a robust legal structure have been fully applied.The model precisely divides these residual risks into three independent but quantifiable dimensions. The operating mechanism of this assessment model is figuratively described by the bill drafters as a dynamic "smart thermostat." Its core regulatory logic lies in the "measurement of economic abstractions": assessing the extent to which the economic risk exposure of an asset is outside the user's actual control or legal recourse. Regulatory intervention is proportionally scaled—when the residual risk of an interest-bearing asset inflates due to human manipulation or opaque operations, regulatory authority and disclosure requirements will automatically and rigorously expand; conversely, if decentralized technology or automated smart contracts are mathematically and cryptographically proven to perfectly neutralize or even eliminate human-managed risk and counterparty credit risk, regulatory intervention will proportionally contract and recede. To ensure seamless data sharing and implementation of this model by the SEC, CFTC, and prudential banking regulators, the bill also proposes the establishment of a "Market Structure Coordination System" (MSCS). Applying this theoretical framework to the current deadlock in interest-bearing stablecoins reveals a clear and logical solution: If third-party platforms like Coinbase merely act as transparent "pipelines," transmitting 100% of the "risk-free returns" held by the Federal Reserve or in the form of short-term U.S. Treasury bonds to end users proportionally and transparently via automated code, while strictly adhering to asset segregation and avoiding any maturity mismatch in the funding pool, leverage amplification, or deliberate risk-laden credit transfer, then, according to the "residual risk assessment model," the "residual corporate risk" and "exposure risk" of this business activity would be deemed extremely low. In this case, regulators should not directly ban or deem such money market funds illegal based on outdated dogmas aimed at protecting the interests of traditional banks, but rather simply use technical means to continuously verify the absolute security of their custody and the authenticity of their disclosures. This classification method, based on technical facts and objective risk characteristics rather than institutional identity and historical licenses, provides a solid technical and legal fallback for bridging political divisions on Capitol Hill. The Impact of the Clarity Act: The success or failure of the Clarity Act, and the ultimate ownership of interest-bearing stablecoin yields, is far more than a simple redistribution of industry profits. The spillover effects of this legislation will penetrate the crypto sphere, generating profound systemic chain reactions on US macro-debt financing, the global hegemony of the dollar, and the evolution of the traditional financial system. 1.Deeply binding with and reshaping the US Treasury market, strengthening the digital dollar's hegemony: By the end of 2025, the total market capitalization of stablecoins with various interest-bearing attributes worldwide had exceeded $15 billion, while the overall market size of broad payment stablecoins was approaching hundreds of billions of dollars. According to the compliance requirements of the GENIUS Act, all future dollar stablecoins must primarily use US short-term Treasury bills (T-bills) and US dollar cash as reserve assets. Second-order impact: If the CLARITY Act ultimately adopts the "yield neutrality" principle, allowing interest-bearing mechanisms to operate in a standardized manner under strong regulatory oversight, it will greatly stimulate massive demand for dollar stablecoins from institutional investors (such as corporate treasury management) and global retail users. According to macroeconomic think tanks, the compliant and interest-bearing stablecoin ecosystem could rapidly expand to an astonishing scale of trillions of dollars in a short period. To maintain the 1:1 reserve ratio, compliant stablecoin issuers (such as major non-bank trust and asset management companies) will be forced to become one of the largest and most stable institutional buyers of US short-term Treasury bills in the open market, continuously injecting astronomical amounts of liquidity into the US Treasury market. The third-order impact: This highly certain structural government bond purchasing power, driven by global digital demand, will become a strategic tool for the Federal Reserve and the U.S. Treasury to manage the sovereign debt curve. Sustained, massive buying will effectively suppress the yields on short-term U.S. Treasury bonds (i.e., lower the front end of the yield curve), thereby substantially reducing the overall borrowing costs of the U.S. government and significantly improving the increasingly deteriorating national fiscal situation and deficit pressures at the macro level. More profoundly, in the "Global South" countries, which have long suffered from high inflation and fiat currency devaluation, the "digital dollar," which can legally generate inflation-resistant returns, will become the ultimate safe-haven asset. Hundreds of millions of overseas citizens will be able to directly convert their domestic wealth into digital assets backed by U.S. Treasury bonds without going through the cumbersome process of opening offshore bank accounts. This is not only a devastating blow to other weaker sovereign currencies, but also a way for the U.S. to achieve the digital penetration of dollar hegemony into the global lower classes without establishing any physical overseas bank branches, further and irreversibly strengthening the dollar's dominant position as the world's only core reserve currency. 2. The forced transformation and growing pains of traditional commercial banking: The reason why banks have used the highest level of political lobbying to try to strangle interest-bearing stablecoins is that they clearly foresaw that this emerging financial infrastructure would deal a devastating blow to their net interest margin (NIM) model.The second-order impact: Once attempts to completely ban third-party provision of interest-bearing stablecoins fail, a structural outflow of cheap deposits from the traditional banking system—especially from small and medium-sized community banks with weak risk resistance—will become an irreversible historical trend. Capital is inherently and ruthlessly profit-driven. Faced with compliant digital dollars that have no minimum threshold, support 24/7 global real-time cross-border settlement, and offer stable annualized returns of around 4% to 5%, traditional banks' zero-interest checking accounts or low-interest savings accounts will instantly lose all market appeal. The third-order impact: To avoid being eliminated in this brutal liquidity battle, traditional commercial banks will be forced to undergo a complete self-revolution, shifting their strategic focus from policy defense to a comprehensive technological offensive. In the foreseeable future, we will witness mainstream commercial banks launching large-scale "tokenized deposits" based on consortium blockchains or public blockchains, or issuing bank-grade compliant high-interest stablecoins themselves based on their massive balance sheets. To absorb the cost pressure of paying higher deposit interest rates, the banking industry will have to undergo painful "capacity reduction," massively cutting physical branches and redundant human resources, and using extreme digitalization to reduce overall operating costs. This process will trigger a reshuffling of cost structures and profit expectations in the US and even global banking industry, with industry concentration further concentrating on Wall Street oligopolies with top-tier fintech capabilities. 3. The "Institutionalization" Watershed and Major Differentiation of the Crypto-Native DeFi Ecosystem: The CLARITY Act not only redistributes interests but also fundamentally reshapes the ecosystem of the crypto industry. This act designates the CFTC as the direct regulator of "digital goods" and drastically expands the traditional definition of "commodity pools," directly covering the spot digital goods market. Second-order impact: This seemingly minor change in legal definition will trigger a tsunami in the crypto asset management field. Any investment fund, decentralized autonomous organization (DAO) treasury management institution, or even a DeFi protocol characterized by aggregated liquidity in the spot digital asset field, that engages in pooling operations, provides users with complex structured interest-bearing strategies, is highly likely to be legally classified as a "commodity pool." Its operators will be forced to fully register with the CFTC and bear high audit and compliance obligations. The third-order impact: The decentralized finance (DeFi) ecosystem will inevitably experience severe polarization.Leading DeFi protocols and centralized exchanges with ample capital and the capacity to bear the high costs of legal compliance will actively embrace regulation, further consolidating their oligopolistic position in the market and transforming into "super-compliant nodes" connecting traditional Wall Street liquidity with crypto assets. Meanwhile, smaller protocols, startup development teams, or anonymous developers adhering to fundamentalism, unable to meet stringent registration requirements, will exploit the limited protections and exemptions reserved in the legislation for "non-controlling blockchain developers" to completely withdraw from the mainstream US view and retreat into a more thoroughly decentralized, permissionless, or even dark web-based offshore environment in order to circumvent legal sanctions. This means that the bottom-up "Wild West" pioneering era of the crypto industry will be completely ended in 2026, replaced by a highly institutionalized "new digital Wall Street" jointly dominated by Wall Street capital, licensed compliance giants, and federal regulatory agencies.