US Cryptocurrency Regulation Bill Overcoming Banking Sector's Turf War, Will It Finally Pass This Year?

▲ US CLARITY Act, Bitcoin/ChatGPT generated image ©

A key regulatory bill set to determine the fate of the US cryptocurrency industry has made a strong start towards congressional passage, dramatically concluding the stablecoin compensation debate, which was the biggest point of contention with the traditional banking sector. With Coinbase, a major player in the industry, strongly supporting this compromise, a brighter-than-ever green light has been lit for the bill's enactment this year.

According to the cryptocurrency media outlet Bitcoinist on May 3 (local time), the final compensation-related provisions of the US cryptocurrency market structure bill, the CLARITY Act, have been made public, finally resolving the biggest political bottleneck that had been holding up the bill's processing. Industry leaders, including Brian Armstrong, CEO of Coinbase, immediately expressed their welcome and urged Congress to expedite the bill's review.

Previously, the biggest obstacle to the bill's passage was whether cryptocurrency companies could offer returns on customers' stablecoin deposits. The banking sector fiercely opposed this, fearing a massive outflow of funds from banks. However, after intense negotiations, both sides found a compromise. According to the compromise, exchanges cannot pay returns in the same form as bank deposit interest, but they can legitimately offer rewards based on Bona Fide Activities that involve the actual use of cryptocurrency platforms or networks.

Faryar Shirzad, Chief Policy Officer at Coinbase, stated that despite the banking sector gaining some restrictions on compensation, the industry successfully protected the core right of Americans to receive legitimate compensation based on actual platform use. Paul Grewal, Chief Legal Officer, also added that the agreement definitively protects compensation for users' genuine platform participation.

With the stablecoin compensation controversy settled, market attention is now turning to the remaining key provisions that will complete the bill's final form. Future legislative processes will focus on clear classification of digital assets as securities or commodities, clarification of jurisdiction between the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), staking defense rights, and capital formation rules.

Alex Thorn, Head of Research at Galaxy Digital, predicted that the Senate Banking Committee's bill markup could officially begin during the week of May 11, after the Senate recess ends. With the source of conflict extinguished, data from the prediction market platform Polymarket shows a very positive 59% probability that the bill will be officially signed into law this year.

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