The Digital Asset Market Clarity Act (H.R. 3633) a major U.S. digital asset legislative proposal that divides regulatory power between the SEC and CFTC, while sparking intense debates over privacy, developer liability, and anti-money laundering (AML) enforcement has been effectively shelved in the U.S. Senate ahead of the August recess, until September delayed by a crowded legislative agenda, alongside opposition from a bloc of Democratic senators over ethics terms.
Senate Republicans released an updated 616-page text of the Digital Asset Market Clarity Act (H.R. 3633), which merges Senate Banking and Agriculture Committees’ texts into a single framework. [A bill text and a section-by-section summary are also available]. The bill assigns spot market authority over “digital commodities” to the CFTC and investment contract assets to the SEC. And seeks to protect software/blockchain developers and decentralized networks that do not hold customer assets from illicit liability.
The new draft includes a White House-backed ethics title barring covered federal officials and their spouses from issuing or sponsoring digital assets during public service, law enforcement stablecoin seizure powers, and temporary bans on digital asset issuance by federal officials through January 20, 2029. Enforcement actions under the updated ethics title are restricted exclusively to the Attorney General, excluding state attorneys general or private parties.
Lawmakers remain divided over the Digital Asset Market Clarity Act (CLARITY Act), specifically concerning ethics enforcement authority, anti-money laundering scope for decentralized finance (DeFi), and federal powers over privacy tools.
Disagreements exist over whether the U.S. Department of Justice or state attorneys general should enforce bans preventing federal officials from issuing or sponsoring digital assets. Critics argue the proposed bans leave passive crypto investments and prior revenue streams untouched. Proposed text includes fines up to $250,000 per day for violators, which critics view as insufficient.
Major banking groups warn the CLARITY Act leaves critical anti-money laundering gaps inviting illicit finance risks and threaten traditional financial safeguards. Critics argue it excludes decentralized entities from Bank Secrecy Act rules and lacks clear authority to target transaction mixers. The bill does not apply traditional bank rules to many unhosted wallets and decentralized finance networks with Federal agencies lacking direct statutory power to restrict or track transaction mixers under the current text.
Major financial institutions including BlackRock, Fidelity, Franklin Templeton, Goldman Sachs, and SoFi publicly urged passage of the bill. On July 24, the Fraternal Order of Police wrote a letter supporting the Clarity Act, reversing an April letter opposing the bill over provisions of the Blockchain Regulatory Certainty Act, which would protect certain developers and firms that do not control customer assets from prosecution for illicit activity conducted by others on the platforms they build. Nevertheless, a group of seven Senate Democrats expressed that the updated ethics safeguards and stablecoin rules remain insufficient, stalling the 60-vote threshold needed to clear the floor before the summer break. A vote on the Clarity Act could be pushed to September 2026, though its final passage remains uncertain due to ongoing political debates and a crowded legislative calendar ahead of the midterm elections.
William Quigley, a cryptocurrency and blockchain investor and co-founder of WAX and Tether, said “There are three things I am focused on with respect to the Clarity Act:
1. Stablecoin Activity Based Rewards & Temporarily Freezing Accounts: The two main friction points in the Clarity Act have been Section 404 (stablecoin activity based rewards) and Section 304 (temporarily freezing accounts and indemnification for doing so). These are mostly resolved at the legislative level. But there will be a lot of drama over these provisions as the responsible federal regulators draft specific rules and guidance to industry participants.
2. What Counts as Activity Based Rewards: Congress is giving the Treasury, SEC and CFTC a year post Clarity Act enactment to jointly define what counts as an activity based reward. The banking and crypto industry will be deeply involved in helping shape the definitions in their favor.
3. Stable Coin Yield: Coinbase seems confident it has a work around to the prohibition in stablecoin yield. But investors should be wary of financial products marketed as passive yield earning investments. Activity based rewards are not in any way the same as the passive yield a customer earns in a savings account.”
At the Securities Exchange Commission (SEC), Commissioner Hester Peirce views payment stablecoins as essential tools for blockchain transactions, supporting a practical 2% net capital haircut for broker-dealers and warning that yield-generating on-chain activities remain bound by securities laws.
He states that payment stablecoins are necessary for transacting on blockchain rails and expanding tokenized asset business. He applauded SEC staff guidance allowing a reduced 2% haircut instead of punitive 100% requirements, aligning stablecoins with money market funds. Warning that moving traditional financial services like lending or yield vaults onto blockchain rails does not exempt them from federal securities regulations.
The People’s Bank of China already made its central bank digital currency (the digital yuan or e-CNY) interest-bearing starting January 1, 2026, while simultaneously banning private yuan-pegged stablecoins. Yifan He, CEO of Red Date Technology and architect of China’s Blockchain-based Service Network (BSN), in an interview published by Irish Tech News on May 15, 2026 stated that he regards stablecoins as practical payment tools if properly regulated. While not a proponent of decentralized yield-farming or crypto-earning protocols, he acknowledges that stablecoins serve a functional purpose for enterprise settlement, fast payments, and international transactions when managed inside compliant frameworks for digital currency integration. He maintains that mainstream blockchain evolution relies on regulated, institutional implementation rather than decentralized retail yield-chasing.
About the Author:
Selva Ozelli Esq, CPA, is an international digital asset legal expert and author of Sustainably Investing in Digital Assets Globally. Her writings are translated into 45 languages and republished in over 200 global publications. She is recognized as an expert media/TV commentator on global digital asset regulation, tax, and technology matters.
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