Due to growing political tensions and ongoing discussions between the banking and cryptocurrency industries, TD Cowen has significantly reduced its estimate of the likelihood that the highly anticipated CLARITY Act, the U.S. cryptocurrency market structure bill, will become law this year.
The investment bank’s chief executive, Jaret Seiberg, now rates the likelihood of passage by the Senate and subsequent approval by the House at about one in three, a significantly more pessimistic assessment than expected.
Coinbase and banks clash over stable coin yield
The senators are would have preparing to release a revised draft of the CLARITY Act as early as this week. The bill aims to establish a regulatory framework for digital assets, but one of its most significant provisions would broadly prohibit platforms from providing yield “directly or indirectly” on stablecoins.
This restriction sparked strong objections from major crypto companies and complicated negotiations with banking interests. Coinbase Global Head of Investment Research said last week, the industry coordinated a counterproposal.
Seiberg argues the proposed restriction on the stablecoin is fraught with pitfalls. “The problem is that it would discourage investors from using stablecoins as a way to invest excess liquidity, which is why platforms like Coinbase would oppose it,” he wrote.
From the perspective of banks, limiting the yield of stablecoins is also beneficial, as it reduces the incentive for crypto platforms to use stablecoins for everyday payments – an outcome that banks see as a threat to core deposits.
Beyond stablecoin yieldseveral other complex and unresolved topics are likely to shape the final negotiations: safeguards for decentralized finance (DeFi), token classification, and rules for tokenizing real-world assets (RWA).
These issues have proven difficult to reconcile across political and industry divides, and they keep lawmakers and industry groups locked in detailed negotiations.
Senators temper optimism on crypto bill
TD Chief Executive Cowen also noted that even lawmakers who previously expressed confidence that the bill would pass are moderating their expectations.
Policy reported that Sen. Mark Warner reduced his estimate for passage to between 50% and 60%, down from previous forecasts of nearly 80%. “The signs do not point to success,” Seiberg observed.
Seiberg expects the most likely window for action to be late July, arguing that the threat of recess could force senators to compromise. “We believe the outlook is weaker. For us, there is a one-in-three chance that the Senate will introduce a version of the CLARITY Act that the House will pass,” he wrote.
He added that the only plausible path to passage, in his view, would be for Congress to push through a compromise over the objections of Coinbase and the banking industry — a scenario he described as possible but unlikely, as Congress typically only pursues this path intermittently.
For now, uncertainty remains over whether the bill’s language can be adjusted to satisfy both sides. A key procedural step to watch out for is the markup date for the Senate Banking Committee, which will indicate whether negotiators are ready to move from drafting to formal review.
Featured image from OpenArt, chart from TradingView.com
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