Melker Bengtsson
TL;DR
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Goldman Sachs CEO David Solomon publicly backed the CLARITY Act in a POLITICO interview, breaking with the banking industry's year of lobbying
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Banks fought the stablecoin rewards hard, but the compromise language is still in the text presented on July 22nd
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The bill's contents are widely supported, but it's stalled mainly on one point: enforcement of the ethics provision
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Senate Republicans aim to get the bill on the floor before the August 7th recess
David Solomon, Goldman Sachs CEO, publicly backed the CLARITY Act in an interview with POLITICO. While the banking industry has spent the last year lobbying hard against the bill, the large investment bank’s CEO now publicly endorses it, saying:
I'm very supportive of moving the Clarity Act forward, so we can get some market structure in place and start to move the innovation process along.
Market structure is exactly what the bill is about. The bill would split oversight of the market between the SEC and CFTC, rather than having individual states as well as the SEC and the CFTC weighing in almost as they please.
Senate Republicans submitted a revised draft earlier this week and aim to get it on the Senate floor before the August 7th recess.
A Break With the Banking Industry
Throughout the year of lobbying, the banks have fought one point hard: the stablecoin rewards, pointing out that it would let crypto platforms pay something very close to interest, without the oversight that traditional banks have. This, they argue, is bad for the consumer.
The resulting language in the bill is a compromise. Crypto platforms are not allowed to pay actual interest, rather they’re allowed to reward clients for actions on the platform. JPMorgan’s Jamie Dimon has been the loudest individual critic of the stablecoin rewards saying this in a Fox Business interview on May 29th:
It allows them to effectively pay interest on deposits, stablecoins or something like that, without protection that they should have. The banks will not accept it that way.
However, the text presented on July 22nd has the full stablecoin rewards text still in it.
Widely Supported, but Stalled on Enforcement
Right now, the actual contents of the CLARITY Act is widely supported. But it’s still stalled in the Senate mainly because of one point in the ethics provision that was presented this week.
Democrats and Republicans have both drawn a red line on enforcement. As it stands in the current draft, enforcement would lie with the Attorney General and the DOJ only. Democrats think having a president-appointed official overseeing this would be a conflict of interest. Republicans, meanwhile, worry that extending enforcement further would open officials up to politically motivated lawsuits from state prosecutors.
The statement from Goldman Sachs and their CEO breaks the narrative coming out of the banking industry over the last year. The banks’ opportunity to lobby and affect the contents of the bill has ended. What matters at this point is agreement across the aisle before the August 7th recess.
