CLARITY Act, will it really pass on May 14? The fate of the cryptocurrency market hangs in the balance

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The U.S. cryptocurrency market structure bill, the CLARITY Act, faces a major turning point on May 14. With the Senate Banking Committee's review approaching, the banking sector and the cryptocurrency industry are on a collision course, making the bill's passage the market's biggest variable.

According to cryptocurrency media outlet Bitcoinist on May 12 (local time), the U.S. Senate Banking Committee is scheduled to proceed with the markup process for the U.S. cryptocurrency market structure bill, the CLARITY Act, on May 14. Markup is a stage where the detailed provisions of a bill are amended and reviewed, and it is considered a crucial gateway for the bill to advance to a full Senate vote.

The core objective of the CLARITY Act is to establish clear criteria for classifying cryptocurrencies as either securities or commodities. The industry has argued that unclear regulations have led to legal conflicts with the U.S. Securities and Exchange Commission (SEC) and ongoing business uncertainties. Previously, the U.S. House of Representatives passed its own version of the CLARITY Act in July last year, and the Agriculture Committee also approved related legislation earlier this year.

During this review, stablecoin compensation regulations have emerged as the biggest point of contention. The compromise agreement, brokered by Republican Senator Thom Tillis and Democratic Senator Angela Alsobrooks, includes a provision prohibiting customer compensation for idle stablecoin holdings. However, compensation for other stablecoin-linked activities, such as remittances, is permitted. The banking sector is strongly opposing this, arguing that stablecoin compensation could lead to deposit outflows.

The American Bankers Association (ABA) has launched a last-minute lobbying effort targeting Republican members of the Senate Banking Committee. The association's CEO reportedly sent letters to member bank CEOs, asking them to directly pressure senators. The banking sector pointed to the allowance of stablecoin interest payments by some intermediaries in last year's GENIUS stablecoin regulation bill as a 'loophole,' arguing that such a structure could destabilize the banking system. Conversely, the cryptocurrency industry is protesting, stating that limiting stablecoin compensation payments by third parties such as exchanges is an anti-competitive measure.

The market views this CLARITY Act review as a significant event that will determine the overall institutional integration trajectory of the cryptocurrency industry. However, the media reports that the bill is likely to be processed along party lines, as there are predictions that Democratic members of the Senate Banking Committee are unlikely to vote in favor. Industry attention is now focused on the Senate Banking Committee's decision on May 14.

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