The CLARITY Act, aimed at regulating digital assets, has stalled in the US Senate after passing the House in July 2025. Coinbase's withdrawal of support has split the crypto industry, jeopardizing the bill's passage before midterm elections. Debates over amendments, including stablecoin yields and surveillance powers, dominate discussions into 2026.
The CLARITY Act, which seeks to establish comprehensive market structure and regulation for cryptocurrencies, passed the House of Representatives in July 2025 amid high hopes for clarity in the sector. However, the legislation has encountered significant delays in the Senate. A hearing by the Senate Agriculture Committee, originally scheduled alongside a markup session by the Senate Banking Committee, was postponed until the end of January 2026. This delay signals that political leaders doubt the bill's current form can secure enough votes to advance.
Key provisions of the Act include bifurcating the crypto market to define oversight between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). It also establishes federal rules for crypto exchanges, brokers, and custodians, incorporating asset segregation policies and surveillance standards. These measures aim to shift away from the SEC's previous "rule-making by enforcement" approach.
The crypto sector's support fractured when Coinbase publicly withdrew backing for the current version, as announced by CEO Brian Armstrong. This move has put the bill's passage at risk ahead of midterm elections. Over 75 amendments have been proposed, touching on diverse areas such as stablecoins, decentralized finance (DeFi), government corruption prevention, and software developer protections.
A major point of contention is the treatment of stablecoins. While the Act, building on the GENIUS Act, prohibits direct yields on stablecoins, it allows affiliates and third parties—like exchanges such as Coinbase—to share benefits from interest on reserves. Banking lobbyists, including those from JP Morgan Chase, are pushing for stricter rules, spilling over into broader market structure debates.
Concerns over expanded surveillance have also emerged. Galaxy Research described the latest Senate draft as the largest expansion of financial surveillance powers since the USA PATRIOT Act, citing new Treasury tools for imposing special measures on digital-asset transactions, instant transaction freezes, and broadened anti-money laundering (AML) obligations. These could hinder DeFi development.
Despite the setbacks, the crypto industry views 2026 as pivotal for achieving regulatory clarity essential for growth. Industry leaders emphasize engaging policymakers across party lines to navigate the amendments and political dynamics.
