Author: Chloe, ChainCatcher
The U.S. Senate Banking Committee will hold a key vote on the "Digital Asset Market Structure Act (CLARITY Act)" on January 15. Although the Agriculture Committee postponed its review to late January due to DeFi-related definitions and bipartisan consensus issues, there is no doubt that this bill is the most significant piece of legislation for crypto regulation since the "GENIUS Act."
This article will deeply analyze the core controversies of the current bill: from the "deposit battle" among banks competing for high-yield stablecoin deposits, to whether DeFi developers should bear criminal liability for their "code," and further to the political tug-of-war over the Trump family's "ethics clause." It can be said that this is not merely a legislative vote, but rather a direct confrontation between traditional financial powers and decentralized mechanisms. The outcome may determine the direction of the global crypto market for the next decade.
Redrawing the Regulatory Map: The Jurisdictional Dispute Between the SEC and the CFTC
On the morning of January 15 at 10:00 AM, the U.S. Senate Banking Committee will proceed as scheduled with the review of the CLARITY Act. Although the market originally anticipated that both committees (Banking and Agriculture) would move forward in parallel, the current situation is clearly more complicated.
The "One In, One Out" of the Dual Committees?
Senate Banking Committee: Led by Tim Scott, its core mission is to define the legal framework for digital assets under the Securities Act. The proposed bill is expected to end the current regulatory status in which the SEC indefinitely classifies tokens as securities solely based on the "expectation of investment," and instead establish a clear exit mechanism and legal procedures for transitioning from securities to commodities. The committee will proceed as planned, aiming to clearly define the boundaries of the SEC's jurisdiction.
Senate Agriculture Committee: Led by John Boozman, it leads the revision of the Commodity Exchange Act and the demarcation of CFTC jurisdiction. Since there are currently bipartisan disagreements on core issues such as the definition of DeFi technology and interest income from stablecoins, therefore...Decide to postpone the review until the end of January.The goal is to gain more time to build a bipartisan consensus and ensure securing key Democratic votes during the final vote, preventing the bill from being deadlocked in the Senate due to polarized opposition.
The SEC's stance is shifting, aiming to bring the cryptocurrency market out of regulatory gray areas.
On January 13, SEC Chair Paul Atkins Post on X to emphasizeThis week marks a milestone for the cryptocurrency industry, as it publicly supports the Congress in clearly defining the jurisdictional boundaries between the SEC and the CFTC. This approach is clearly distinct from the previous chairman's heavily criticized "enforcement-style regulation." Atkins advocates for promoting a legislative framework, aiming to bring the crypto market out of regulatory gray areas.
At the same time, he pointed out that enhancing market certainty is highly aligned with Trump's vision of building a "World Cryptocurrency Capital." Atkins expressed optimism that the bill will be approved and signed into law this year, and he expects it to significantly promote the long-term development of the cryptocurrency market while strengthening investor rights protection.
Deposit Defense War: Should the "Yield" of Stablecoins Be Banned Entirely?
One of the current points of contention stems from a patchwork-style revision to the "GENIUS Act." Although the bill explicitly prohibits stablecoin issuers from paying interest, it does not impose restrictions on "distributors," which has sparked strong dissatisfaction among traditional financial institutions.
Taking Coinbase as an example, the platform currently offers users holding USDC a reward of approximately 3.5%. Since Coinbase acts as a distributor rather than the issuer (Circle), it is legal under the current framework of the GENIUS Act. However,The American Bankers Association (ABA) is conducting strong lobbying efforts., requesting legislators to expand the scope of application of the interest ban to affiliated companies and partners of stablecoin issuers.
The Three Core Concerns of the Banking Industry
1. Deposit Outflow:The banking industry is concerned that if stablecoin yields continue to exceed traditional savings rates, it could trigger a large-scale shift of funds. The American Bankers Association (ABA), citing data from the Treasury Department, pointed out that without strict interest bans, as much as $6.6 trillion in U.S. bank deposits could be at risk of outflow.
2. Weaken lending capacity:The outflow of deposits will directly challenge the core business model of traditional banks, particularly the lending capacity of community banks. Banks use these deposits to provide essential loans to local businesses, farmers, students, and homebuyers. Once the funding pool shrinks due to competition from stablecoins, local lending operations will be severely disrupted.
3. Unfair Competition:Stablecoins are often marketed as products with functions similar to bank deposits, yet they lack the actual insurance protection provided by the Federal Deposit Insurance Corporation (FDIC). The American Bankers Association (ABA) criticized cryptocurrency exchanges for using extensive advertising to downplay the differences in risk, creating unfair competition and exposing consumers to financial risks.
The Comeback of the Cryptocurrency Industry
Coinbase Chief Policy Officer Faryar Shirzad on Charges Against the Banking SectorLaunch a counterattackHe pointed out that U.S. banks earn more than $36 billion in profits annually from payment and deposit services. The banking industry's eagerness to ban stablecoin rewards essentially stems from a desire to protect existing interests, rather than from prudent regulation.
In addition, Shirzad also citedCharles River Associates (CRA)andCornell University's Independent ResearchIt confirmed that there is no significant correlation between the growth of stablecoins and outflows from bank deposits, and that incentives would need to be as high as 6% to have a meaningful impact. It also warned that while the U.S. remains mired in internal debates, China has already announced interest payments on its digital yuan. If the U.S. weakens the competitiveness of stablecoins due to banking lobbying, it would effectively cede leadership in the global digital currency race, posing a threat to the dominance of the U.S. dollar.
On the other hand, Alexander Grieve, Vice President of Government Affairs at Paradigm, characterized the banking industry's demands as "false and alarmist" political interference.He believes thatIf legislators are forced to amend the reward provisions in the "GENIUS Act," mandating that distributors withhold earnings, it would effectively amount to imposing a "hidden holding tax" on stablecoin holders, forcing middlemen to siphon profits that should rightfully belong to consumers. Grieve warned that such actions—sacrificing technological innovation to protect traditional financial profits—would severely weaken the international appeal of the U.S. stablecoin ecosystem, causing the United States to fall comprehensively behind in the competition for Web3 financial infrastructure.
DeFi Controversy: Does Writing Code Count as "Engaging in Monetary Business"?
This is the technically most complex part of the bill and also the main reason the Agriculture Committee postponed its review. The point of contention is whether the person who writes the code should be held responsible for its automatic execution.
The U.S. Department of Justice has previously prosecuted mixer developers (such as co-creators of Tornado Cash) under the "unlicensed money transmission laws," based on the legal assumption that "code is a service intermediary." Regulators argue that developers who write and deploy code with fund-handling capabilities are essentially establishing an automatically operated "money transmission business." In other words, developers are held responsible for the subsequent execution of their code. This legal interpretation, which equates "software development" with "financial operations," is seen by the Web3 industry as a fundamental threat to technological innovation.
In response to this,DeFi Education Foundation (DEF)Contrary to the claims of core practitioners, this is an impractical logical paradox in technical practice. Traditional financial institutions can bear compliance obligations only because they have "substantial control" over transactions. However, a truly decentralized protocol, once deployed, possesses immutable and automatically executing characteristics, causing developers to completely lose the ability to intercept transactions or freeze assets. To require a "developer" who cannot interfere with the operation of the software to assume the same compliance responsibilities as a bank is no different from requiring automobile manufacturers to face criminal charges for every speeding violation that occurs on the road.
If the bill adopts the current strict definitions, developers could face criminal risks due to their smart contracts being used by third parties for illegal purposes. This would not only undermine the technological foundation of DeFi but also trigger a mass exodus of research and development talent, ultimately causing the United States to be marginalized in the global competition for the next generation of financial infrastructure.
Moral Clause: The Trump Family and Conflicts of Interest
As the DeFi platform World Liberty Financial (WLF) and its stablecoin USD1, in which the Trump family is deeply involved, rapidly expand (with a market capitalization reaching $3.4 billion), political ethics issues have become one of the key variables in whether the CLARITY Act can achieve bipartisan consensus.
WLF's affiliated entity formally applied to the Office of the Comptroller of the Currency (OCC) last week for a "National Trust Bank Charter."This move immediately triggered a political storm, with the central controversy being whether a regulatory chief appointed personally by the president has the authority to review applications from a commercial bank controlled by the president's family. Democratic leader Elizabeth Warren promptly issued a statement, directly pointing out the conflict of interest:
"President Trump's cryptocurrency company has just applied for a federal banking license, and the application will be reviewed by a regulator appointed by the president. We have never seen a financial conflict of such magnitude or corruption. When the Senate considers the market structure bill in the coming days, it must directly address this issue: the responsibility of banking regulators is to ensure a fair and stable financial system, not to profit from their boss's (the president's) private business interests."
At the same time, in response to the aforementioned controversies, Democratic senators such as Elizabeth Warren have insisted on including "ethical provisions" in the CLARITY Act. These provisions aim to prohibit federal senior officials and their immediate family members from obtaining personal benefits from digital asset companies while in office. Although the House of Representatives previously avoided this issue during deliberations in order to pass the bill, Democratic senators have clearly stated that they will oppose the final vote if restrictions on conflicts of interest for senior government officials are not included. This has added a layer of political maneuvering beyond technical considerations to the January 15th vote.
This moment will set the tone for the next decade of the crypto industry.
The vote on the "CLARITY Act" essentially represents the U.S. government's attempt to incorporate crypto assets into the existing financial and political system, following the recognition of their strategic significance. Regardless of the final outcome, the "gray area" between the crypto industry and traditional finance is gradually disappearing. This vote will have far-reaching impacts on three levels:
First, regulatory clarity will trigger a significant "compliance premium." If the CLARITY Act succeeds in clarifying the jurisdictional boundaries between the SEC and the CFTC, it will completely end the turbulence of "enforcement-based regulation," bringing certainty for trillions of dollars in institutional capital to enter the digital asset market. At that point, cryptocurrencies will formally transition from a marginal speculative asset to mainstream financial products and instruments.
Second, this is a geopolitical competition over the center of innovation. Whether it is imposing restrictions on stablecoin yields or defining the liabilities of DeFi developers, these measures essentially test the upper limit of America's tolerance for technological innovation. If the bill ultimately tilts toward conservative banking protectionism or imposes harsh criminal penalties on code, it could likely trigger a brain drain of research and development talent. Conversely, if the bill manages to preserve flexibility for innovation, the United States could maintain its position as the "world capital of cryptocurrency," further solidifying the dominance of the dollar in the digital era.
Finally, the bill's passage marks a "deep integration" of Web3 with traditional power structures. From the competition over interests between stablecoins and bank deposits to ethical provisions targeting the presidential family, cryptocurrencies are no longer a utopia for tech enthusiasts, but have become the focal point of real-world power and capital struggles.