In a report published on Thursday, Reuters said the long-awaited crypto market structure legislation, known as CLARITY Actmay be at risk of not being signed into law in 2026. The uncertainty comes as opposition from the banking sector intensifies, particularly over key provisions related to stablecoin regulation.
Impasse in crypto legislation
To r reportThe legislation hit a fresh deadlock after the banks refused to back the White House’s proposed deal. The breakdown in negotiations has raised serious doubts about whether Congress will be able to advance the bill before the legislative window narrows ahead of the midterm election season.
Banks have objected to regulations that allow stablecoin issuers and other crypto companies to offer lucrative products and customer rewards. Lenders argue that such incentives could drive depositors away from traditional banks, making it more difficult for them to fund loans and support credit creation.
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Crypto companies, for their part, believe that the ability to offer rewards is essential to attract users and remain competitive. They argue that banning such incentives would amount to an anti-competitive restriction designed to protect incumbents.
The White House stepped in to broker a deal last month in an effort to break the deadlock. The administration proposed to give permission stablecoin rewards in limited contexts such as peer-to-peer (P2P) payment activity, while prohibiting rewards on idle balances.
The proposal is aimed at striking a balance between innovation and deposit stability, said four people familiar with the private negotiations. Crypto companies have reportedly accepted the deal. However, banks have indicated that they are still unable to support it.
The banking sector is looking for tighter remuneration rules
Two sources told Reuters that lenders want tighter restrictions on the types of activity that qualify for bonuses. A senior White House official said that banks are worried that even narrower frame could accelerate the flight of savings.
A banking industry source added that some lenders believe the activities allowed under the deal still significantly weaken deposit bases.
It is said that several senators support the position of the banking sector, and industry representatives believe that they can provide more favorable conditions with this political support.
Beyond the stablecoin controversy, the bill faces additional political hurdles. Legislators disagree on related provisions ethics and illegal finance.
Time is running out to pass the CALRITY Act
Time is another major obstacle. The Senate’s sitting time is limited, especially as lawmakers prepare to leave Washington for the summer and begin campaigning for midterm elections.
Adrian Wall, chief executive of the Digital Sovereignty Alliance, a crypto advocacy group, said the transition window is closing fast. If the bill is not approved and sent to the president by July, he stressed, it will be more difficult to revive the momentum until the election.
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The political calculus could become even more complicated after November. If Democrats gain seats in Congress, the prospect of passage crypto friendly legislation it can decrease even more.
Geopolitical developments are fueling more uncertainty. According to Brian Gardner, chief Washington strategist at Stifel, the war in Iran will make it more difficult for Congress to focus on crypto regulation this year.
In a memo released Tuesday, Gardner wrote that the legislative calendar is working more against the bill. “The calendar is becoming the enemy of this bill,” he said.
Featured image from OpenArt, chart from TradingView.com
