SEC's Power Curbed on Key Tokens
The Senate Banking Committee released the draft text of the Digital Asset Market CLARITY Act just past midnight on Wednesday, May 12, 2026, setting the stage for a pivotal markup scheduled for Thursday. The bill, championed by Chairman Tim Scott, Digital Assets Subcommittee Chair Cynthia Lummis, and Senator Thom Tillis, would sharply limit the U.S. Securities and Exchange Commission’s (SEC) authority to classify certain digital assets as securities. Notably, Section 105 of the draft bars the SEC from labeling any token as a security if a U.S. court issued a final, unappealable judgment before enactment stating otherwise.
Section 102 introduces a new certification process: token issuers can submit evidence to the SEC asserting their asset is not a security. If the SEC does not object within 60 days, that filing becomes legally effective—potentially shifting the burden of proof off crypto startups and onto regulators.
The bill first stalled in January 2026 after Coinbase withdrew support over proposed stablecoin yield restrictions.
Spot ETFs Get Special Protection
A central provision in the CLARITY Act draft specifically protects tokens that serve as the principal asset of any U.S.-listed spot exchange-traded product (ETF) trading as of January 1, 2026. This carve-out directly impacts Bitcoin and Ethereum, which both had spot ETFs listed on U.S. exchanges by that date. According to decrypt.co, this protection would prevent the SEC from retroactively declaring these tokens securities—a move with broad implications for institutional investors and ETF issuers alike.
On paper, this offers legal certainty for Bitcoin and Ethereum holders; in practice, it may leave other tokens in regulatory limbo.
ETF inflows have surged in recent months: U.S. spot Bitcoin ETFs drew $1.9 billion of net inflows in April 2025 alone, with cumulative inflows since their 2024 launch now nearing $58 billion. These funds hold over 1.3 million BTC collectively—a figure that underscores Wall Street’s growing stake in digital assets even as regulatory battles continue.
Stablecoin Yield Fight Far From Over
The most contentious issue remains stablecoin yields. In January, Coinbase withdrew its support for the CLARITY Act due to concerns over language that could restrict yield offerings on stablecoins—interest-like rewards paid to users who hold or lend these dollar-pegged tokens. Since then, banks have lobbied aggressively to tighten restrictions further; on Sunday before the markup vote, American Bankers Association CEO Rob Nichols urged member banks to pressure senators against loosening stablecoin rules.
A compromise proposal from Senators Tillis and Alsobrooks earlier this month would ban passive yield (rewards simply for holding stablecoins) but allow activity-based rewards tied to platform participation. This nuanced approach attempts to balance innovation with risk mitigation but has yet to satisfy all stakeholders.
The debate is not purely academic: BlackRock recently filed two SEC applications related to tokenized finance products—including a proposed reserve vehicle for stablecoin issuers—signaling that major financial institutions are preparing for rapid growth in regulated digital asset markets.
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Banks Lobby to Limit Crypto Rewards
Traditional banks are intensifying their campaign against what they see as unfair competition from crypto platforms offering higher yields on stablecoins than savings accounts can match. Sunday’s letter from Rob Nichols was just one salvo in a broader lobbying blitz aimed at shaping final bill language before Thursday’s committee vote. Banks specifically want language added that would ban crypto firms like Coinbase from offering any yield on stablecoins—a position at odds with much of the crypto industry.
Senate Banking Chairman Tim Scott has stated ethics-related provisions fall outside his committee’s jurisdiction and cannot be considered until the bill reaches the Senate floor later this summer. That leaves roughly one week after Thursday’s markup before Congress breaks for Memorial Day recess on May 21—and little time for further amendments before a potential July 4 passage targeted by the White House.
Crypto Industry Pushes for Final Passage
Despite lingering disagreements over stablecoin yields, passage of the CLARITY Act remains a top priority for digital asset industry leaders who have waited nearly five years for comprehensive legislative guidance. Polymarket bettors raised odds of passage to 79% following news of compromise language but saw confidence slip back to 63% by Monday morning—a reflection of ongoing uncertainty rather than outright pessimism.
Bitcoin itself has responded cautiously: trading around $82,000 as of early this week—up about 0.65% from Sunday morning but still roughly 22% below its level a year ago and well off its October 2025 peak above $126,000. Nine consecutive days of net inflows into Bitcoin ETFs through early May removed an estimated 33,000–35,000 BTC from tradable supply, highlighting persistent demand even amid regulatory flux.
Whether lawmakers can bridge remaining divides before Memorial Day recess will determine if July’s target is realistic—or another missed milestone in Washington’s long-running effort to regulate crypto markets.
Next steps
The Senate Banking Committee is scheduled to hold a markup and vote on the CLARITY Act on Thursday, May 14; if the bill advances out of committee, it will move to the Senate floor with only about one week of floor time available before the Memorial Day recess on May 21, otherwise immediate progress toward the White House's July 4 passage target remains unclear.