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Bipartisan Senate Deal on Stablecoins: US Crypto Legislation Clears Major Hurdle

By Telemac

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Bipartisan Senate Deal on Stablecoins: US Crypto Legislation Clears Major Hurdle

A major legislative breakthrough has been reached in the US Senate this May 2026. After months of intense negotiations and what seemed like an insurmountable deadlock, Republicans and Democrats have reached an agreement on the thorny issue of stablecoin yields. This decisive breakthrough allows the CLARITY Act, the flagship crypto regulation bill in the United States, to make significant progress through the legislative process. The text could redefine the entire regulatory framework applying to cryptocurrencies in the world’s second-largest market. The agreement between Senators Thom Tillis and Angela Alsobrooks surprised many observers with its swiftness, as negotiations had been stalled since the beginning of the year.

Background

Since the beginning of 2026, the US crypto market structure bill had been deadlocked. The CLARITY Act, already passed by the House of Representatives in July 2025 with broad bipartisan support, was stalled in the Senate unable to clear committee hurdles. Two major sticking points blocked any progress: the regulatory treatment of stablecoin yields, and the questions surrounding conflicts of interest generated by President Trump’s and his family’s involvement in the cryptocurrency sector.

Industry actors assessed the bill’s passage odds between 25% and 60% depending on the source, reflecting widespread uncertainty. The anticipation was all the greater as the US crypto market represented hundreds of billions of dollars in capitalization and millions of users awaiting legal clarity. Without a clear legislative framework, sector companies remained in an uncertainty regime where each regulatory decision could be overturned by a future administration. Regulatory uncertainties had already prompted several major US banks to delay their crypto integration projects.

The debate centered particularly on traditional banking institutions and their fear of seeing customers desert deposit accounts for stablecoin products offering more attractive yields. Major American banks, mobilized through associations like the American Bankers Association, had threatened to obstruct the bill if yield provisions were not strengthened. This divide between traditional financial institutions and crypto companies had led to months of unsuccessful negotiations, each side wielding arguments of consumer protection and financial stability. Meetings between representatives of both camps at the White House intensified in recent weeks, ultimately leading to this unexpected compromise.

At the heart of the debate also lay the question of President Trump’s personal involvement in the crypto sector. The Trump family had accumulated approximately $1.4 billion in crypto-related revenue, notably through World Liberty Financial. They also hold a 20% stake in mining company American Bitcoin. These close ties to the ecosystem raised questions about potential conflicts of interest and led some Democratic senators to demand specific provisions to limit political influence on digital asset policies.

The Facts

The agreement reached between Senator Thom Tillis, Republican from North Carolina, and Senator Angela Alsobrooks, Democrat from Maryland, establishes a clear line between what will be prohibited and what will remain permitted for crypto sector companies regarding stablecoins.

The new CLARITY Act text explicitly prohibits crypto companies from paying rewards on stablecoins in a manner « economically or functionally equivalent to the payment of interest on an interest-bearing bank deposit. » This legal formula makes it possible to clearly distinguish between passive yield, similar to a savings account, and incentives linked to actual activity on the platform. The wording resulted from a delicate balance between bank demands for a strict ban and the crypto sector’s desire to maintain loyalty programs.

In practice, the following loyalty programs remain permitted: rewards for transactions made, payments processed, funds transfers executed, remittances completed, and providing liquidity to decentralized finance protocols. Conversely, passive yield payments, where users receive interest simply for holding their tokens on a platform without any activity, will now be illegal for stablecoin issuers and exchange platforms. Issuers like Circle and Paxos will therefore need to redesign their programs to comply with the new rules.

This legislative arbitrage protects the traditional banking sector against potential deposit outflows while offering crypto companies a framework enabling them to innovate and offer competitive products. The Blockchain Association, one of the sector’s main lobbying groups, hailed this pragmatic solution. « Resolving the stablecoin yield question clears the path to a Senate Banking Committee markup and brings us meaningfully closer to comprehensive market structure legislation, » said Summer Mersinger, its CEO. « This text represents months of tireless work by many sector actors to achieve a balance that protects consumers while enabling innovation. »

The White House also exerted constant pressure in favor of advancing this bill. Executive advisors repeatedly indicated that the final obstacles were being resolved and that the president actively supported the bill’s passage. Senate Banking Committee Chair Tim Scott reaffirmed his determination in a public statement: « We are making real progress on digital asset market structure legislation and restoring confidence in our economy. The committee is working toward a bipartisan markup in May to advance this text decisively. »

The announcement of this legislative compromise also marked Coinbase’s return to favor, America’s leading exchange. CEO Brian Armstrong had frozen the process in January by withdrawing support for the text on the eve of a scheduled committee vote, causing the postponement of the parliamentary review. This decision had sent shockwaves through the sector, with many viewing it as an abuse of power by America’s leading exchange. Following the compromise, Armstrong simply posted on social media: « Mark it up, » clearly indicating his support for the committee vote to proceed. This turnaround helped passage odds jump from 46% to 64% on Polymarket, reflecting the market’s restored optimism.

Analysis

Brian Armstrong’s reversal perfectly illustrates the critical importance of the yield question for the crypto ecosystem. In January, Coinbase’s CEO had justified his opposition with the insufficiency of reward treatment in the initial bill. Without the clarification brought by the Tillis-Alsobrooks compromise, the text would likely never have been able to advance significantly this year. Several analysts noted that Armstrong had used his weight in the sector to obtain substantial modifications to the text, demonstrating the lobbying capacity of America’s largest exchange.

Politically, the November 2026 midterm elections add considerable pressure to the timeline. Senator Bernie Moreno, Republican from Ohio, warned Congress that this negotiation period represented the last real chance to achieve meaningful crypto legislation before the usual slowdown in legislative work during the election period. The one-year deadline given to regulatory authorities to publish implementing rules creates additional urgency. After this deadline, the bill’s provisions will take effect even without implementing rules, which could create legal insecurity for companies.

The relevant authorities, the SEC and CFTC, will need to jointly produce implementing guidelines, promising complex technical negotiations. Both agencies have different approaches to crypto regulation and will need to find common ground to precisely define the contours of permitted reward programs. The definition of what constitutes « real activity » as opposed to « passive yield » will be the subject of many debates and likely litigation. Sector companies will therefore need to be very cautious in designing their programs to avoid regulatory sanctions.

Industry reactions were largely positive. Circle, the USDC issuer, described this compromise as « the culmination of months of tireless work to deliver a text we can all live with. » The company emphasized that this final step represents the most significant regulatory development for the crypto sector in recent years. Other actors, like Van Buren Capital, adopted a more cautious tone: « This is fine. It may not feel like it, but it is, » analyzed Scott Johnsson, the fund’s General Counsel. Nic Carter, a well-known sector investor, was more direct: « The banks won, » he declared on social media.

Market Reactions

The announcement of the legislative agreement triggered a marked bullish movement on cryptocurrency-linked assets. Bitcoin briefly crossed the psychological threshold of $80,000, extending a significant rally that began the previous week. This progression was accompanied by a notable increase in trading volumes, suggesting a renewed interest from institutional investors. Ethereum and other major cryptocurrencies also benefited from this positive dynamic.

Circle shares, a major USDC issuer, jumped 16%, their strongest gain in many months. Coinbase, America’s leading regulated exchange, and other sector companies also posted double-digit gains. Shares in mining companies like Marathon Digital and Riot Platforms also rose, reflecting the market’s general optimism about the sector’s regulatory future.

Trading volumes increased considerably on major platforms, signaling a renewed interest from institutional and retail investors. Stablecoins, long considered the least volatile segment of the crypto market, are now at the center of regulatory debate and are attracting the attention of traditional finance actors. Market data indicates that investment flows into regulated crypto products resumed upward momentum following the compromise announcement.

Outlook

Several legislative steps remain before the CLARITY Act’s final adoption. The text must first obtain a favorable committee vote in the Senate before being presented to the full chamber vote. It will then need to be reconciled with the version adopted by the House of Representatives in July 2025, with both texts presenting differences that will need to be negotiated. The reconciliation conference could take several weeks or even several months, depending on the complexity of the divergences.

The legislative path remains fraught with potential obstacles. Midterm elections could considerably slow work and the risk of controversial amendments during the reconciliation process remains real. Concerns about Trump’s conflicts of interest have not disappeared from public debate. Several Democratic senators continue to demand specific provisions to prevent political figures and their associates from profiting from their influence on digital asset policies.

This conflict of interest question could resurface forcefully during the floor vote. At a recent Banking Committee hearing, SEC Chair Paul Atkins faced pointed questions from Democratic representatives about the administration’s ties to the crypto sector. Committee Chair Tim Scott suggested that ethical questions should be handled by the Finance Committee, not within this bill.

For the American crypto sector, this compromise nonetheless represents significant progress. The promised regulatory clarity could incentivize institutional investors to deploy larger capital amounts in the ecosystem, with clearly defined rules of the game. Sector companies will now be able to develop their products knowing where they stand, without fearing that practices deemed regulatorily incorrect will be held against them years after their launch. This regulatory visibility could accelerate institutional adoption and strengthen America’s position in the global competition for blockchain innovation.

Sources

Telemac
Telemachttp://cryptoinfo.ch

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