Nikolas Sargeant
Senate Agriculture Committee Chairman John Boozman announced legislative text for cryptocurrency market structure legislation will be released by close of business Wednesday, January 21, with a committee markup scheduled for Tuesday, January 27, at 3 p.m., as parallel action unfolds in the Banking Committee where senators submitted 137 amendments to the CLARITY Act.
"This schedule ensures transparency and allows for thorough review as the committee moves forward with legislation to provide clarity and certainty for crypto markets," Boozman stated, thanking Senator Cory Booker for continued partnership on legislation designed to establish regulatory frameworks for digital asset markets.
The latest Senate Banking Committee draft prohibits digital asset service providers from paying interest solely for holding payment stablecoin balances, marking a significant victory for traditional banking groups. The provision allows rewards tied to specific activities including transactions, wallet usage, loyalty programs, liquidity provision, collateral deposits, and participation in network governance.
"Banks may have won this round on stablecoin yield," Fox Business reporter Eleanor Terrett observed, noting the draft explicitly states companies cannot pay interest just for holding balances. The language emerged after intense lobbying from banking groups warning that yield-bearing stablecoins could drain deposits from community institutions.
Coinbase told the cryptocurrency industry to "stand down on opposing the stablecoin yield language for now," according to Decrypt Senior Writer Sander Lutz, citing a source with direct knowledge. The exchange characterized the provisions as "the least favorable language they'd still support," with Lutz noting the company believes "the loopholes are decent enough for yield on stablecoin activity/loyalty programs."
JPMorgan CFO Jeremy Barnum told analysts the creation of "a parallel banking system that includes something that looks a lot like a deposit that pays interest, without the associated safeguards, is an obviously dangerous and undesirable thing." The bank recently reported $25 billion in net interest income last quarter, prompting crypto advocates to argue banks oppose stablecoin yield to protect profit margins rather than consumer interests.
Key Senate Democrats are demanding ethics guardrails prohibiting public officials, including the president, from profiting through cryptocurrency business ties, creating a potential deal-breaker for the legislation. Senator Adam Schiff stated ethics controls covering the White House were essential, noting "that needs to be applied to everyone."
Senator Ruben Gallego escalated, calling it "a red line" and warning, "They need to get it right, or they're not going to have enough votes to pass this." Three Democratic senators sent a letter demanding a full hearing before Thursday's markup, criticizing the release of legislative text "just two days before the markup."
Industry sources told Lutz that current assessment of the bill's chances are "NGMI" due to ongoing disagreement over ethics language between Senate Democrats and the White House. Bo Hines of the Bitcoin Policy Institute warned that "if Democrats kill landmark legislation that would cement U.S. leadership in fintech simply to score political points, they'll have to explain that choice to voters in November."
The Banking Committee added a substantial new section on decentralized finance that the crypto lobby wasn't expecting, prompting industry sources to express concern over definitions and ambiguous language. Attorney Zack Shapiro's analysis noted the bill protects software developers while establishing compliance pressure on web-based user interfaces.
"The bill explicitly protects software developers and preserves the right to self-custody digital assets," according to the Senate Banking Committee GOP's myth-versus-fact release. Section 605 states federal agencies may not "prohibit, restrict, or otherwise impair" a US individual's ability to self-custody digital assets for lawful purposes.
Consensys attorney Bill Hughes characterized the moment as potentially "the best deal you could ever hope to get," arguing critics should "hold your nose and accept" the compromise. Paradigm VP Alexander Grieve warned Congress might "squander progress" by restricting stablecoin rewards to merchant transactions, calling it "a government-mandated windfall for financial intermediaries at the expense of individual Americans."
Senator Cynthia Lummis emphasized bipartisan contributions, stating "every section includes bipartisan input and I look forward to working with my Democratic colleagues to deliver a bill that secures America's financial future."
