May 8 (Reuters) – U.S. senators are set to consider long-awaited legislation that would create a regulatory framework for cryptocurrency next week, potentially ending a deadlock over the bill that pitted crypto companies \u200bagainst U.S. banks.<\/p>\n\n\n\n
The bill, dubbed the Clarity Act, would, if signed into law, clarify financial regulators’ jurisdiction \u200cover the burgeoning sector, potentially boosting digital asset adoption.<\/p>\n\n\n\n
U.S. Senator Tim Scott, chairman of the Senate Banking Committee, said on Friday the panel would hold an executive session on May 14 at 10:30 a.m. (1430 GMT) in the Dirksen Senate Office Building in Washington, D.C.<\/p>\n\n\n\n
The crypto industry has been \u200bpushing for the legislation, saying it is existential to the future of digital assets in the U.S. and \u200bnecessary to fix core, longstanding problems for crypto companies. Among other things, the legislation would \u2060define when crypto tokens are securities, commodities or otherwise, giving the industry legal clarity.<\/p>\n\n\n\n
The bill also includes a provision aimed \u200bat settling a heated dispute between crypto companies and the banking industry. Under the compromise brokered by Republican Senator Thom Tillis and \u200bDemocratic Senator Angela Alsobrooks, customer rewards on idle holdings of dollar-backed crypto tokens known as stablecoins would be prohibited, given their resemblance to bank deposits.<\/p>\n\n\n\n
Rewards on other activities associated with stablecoins, such as sending a payment, would be permitted. Banking trade groups have pushed back on \u200bthis provision, saying it gives crypto companies too much latitude and could shift deposits away from the regulated banking system.<\/p>\n\n\n\n
Banks \u200bhave launched a last-ditch effort to peel support from some Republicans on the Senate Banking Committee before the hearing, but it is unclear \u200cif they \u2060will be able to do so.<\/p>\n\n\n\n
Lobbyists for the banking industry have been seeking a fix in the Clarity Act to close a “loophole” stemming from legislation signed into law last year that allows intermediaries to pay interest on stablecoins. Banks say this would lead to a flight of deposits from the insured banking system, potentially threatening financial stability.<\/p>\n\n\n\n
Crypto companies say that prohibiting \u200dthird parties, \u200bsuch as crypto exchanges, from \u200bpaying interest on stablecoins would \u2060be anti-competitive.<\/p>\n\n\n\n
The industry hopes the Clarity Act gets passed in the coming months before the November midterm elections, in which Democrats could wrest control of the House of Representatives.<\/p>\n\n\n\n
The House passed \u200bits version of the Clarity Act in July last year, but the Senate needs to \u200bpass the bill \u2060by the end of 2026 in order to send it to President Donald Trump’s desk.<\/p>\n\n\n\n
Many congressional Democrats have been opposed to the bill, arguing it is too weak on anti-money laundering provisions, and that it should do more to prevent political officials from profiting \u2060from crypto \u200bventures.<\/p>\n\n\n\n
The bill would need support from at least seven Democrats in the \u200bfull Senate to gain approval.<\/p>\n\n\n\n
President Trump courted industry cash, pledging to be a “crypto president,” and his family’s own crypto ventures have helped to propel the sector \u200binto the mainstream.<\/p>\n\n\n\n