Senate hands banks win in stablecoin rewards fight … or did they?

The U.S. Senate’s new digital asset market structure legislation is pleasing some stakeholders, annoying others, and confusing everyone else.

On January 12, Senate Agriculture Committee Chair John Boozman (R-AR) postponed a markup session for his panel’s digital asset market structure bill. Boozman said the session, originally planned for Thursday (15), would be pushed back to the final week of January “to finalize the remaining details and ensure the broad support this legislation requires.”

On Tuesday, Boozman confirmed January 27 as the new markup session date, while the revised copy of the committee’s market structure text will be issued on January 21. The Ag committee’s bill will ultimately need to be harmonized with the market structure bill being developed in the Senate Banking Committee before heading to the Senate floor for a vote, where it would require 60 votes for passage.

Speaking of, Banking is plowing ahead with its scheduled Thursday markup session after a new 278-page draft was released on Monday night. Formerly known as the Responsible Financial Innovation Act, the bill has been rechristened the CLARITY Act to match the name of the market structure legislation that the House of Representatives passed last summer.

Potential amendments to Banking’s CLARITY were being accepted up to 5 pm Tuesday. Over 100 were reportedly filed by that deadline, so Thursday’s markup session promises to be a lengthy and raucous affair.

For the moment, the new draft addresses many of the contentious issues over which the committee’s minority Democrat members had expressed concern, but in doing so, the bill may have annoyed other stakeholders.

Among the draft’s most substantive changes is a new prohibition (Sec. 404) on digital asset exchanges like Coinbase (NASDAQ: COIN) offering ‘rewards’ to users who passively hold stablecoins on their platforms. Specifically, the draft says “a digital asset service provider may not pay any form of interest or yield (whether in cash, tokens, or other consideration) solely in connection with the holding of a payment stablecoin.”

However, in a move initially suggested by committee member Angela Alsobrooks (D-MD), the ban wouldn’t apply to “an activity-based reward or incentive, including any consideration, reward, or benefit” related to activities like staking, transactions, transfers, payments, remittances, conversions, and settlements.

But the activity exemption would also encompass “the use of a wallet, account, platform, application, protocol, or network,” “membership or participation in a loyalty, promotional, subscription, or incentive program,” “providing liquidity or collateral,” plus a few other ‘activities.’

Alsobrooks is reportedly unhappy with the extremely broad way the draft incorporates her ‘activity’ proposal. Semafor’s Eleanor Mueller tweeted that the minority party’s view is that the new draft’s text “is not fully representative of the yield proposal put forth by Alsobrooks and Democrats as it allows for many exemptions and does not provide an actual prohibition.”

It’s quiet … too quiet

Companies like Coinbase—which previously referred to any attempt to prohibit stablecoin yield offerings as a ‘red line’—have been curiously quiet on the new stablecoin language. Their legal teams are almost certainly studying this language carefully for new loopholes to exploit.

Coinbase’s chief legal officer, Paul Grewal, tweeted Tuesday that Congress “shouldn’t pick winners and losers” just because banks are “lobbying to kill crypto rewards.” Grewal also tweeted a link to Coinbase’s astroturf group Stand With Crypto, urging people to “tell your senator” not to give in to bankers’ lobbying.

Decrypt’s Sander Lutz tweeted Tuesday morning that Coinbase was “telling the crypto industry to stand down on opposing the stablecoin yield language for now …. Saying it’s a win for the banks but it’s basically the least favorable language they’d still support.” (Coinbase later denied saying this.)

Lutz added that Coinbase could push back harder if the banking lobby “extracts even more changes,” but appears to believe that “the loopholes are decent enough for yield on stablecoin activity/loyalty programs etc that they could live with it.”

The Blockchain Association tweeted a quote from CEO Summer Mersinger saying banks are engaging in a “relentless pressure campaign … to protect their own incumbency.” Should the banks’ efforts result in the market structure bill’s failure to pass, “it would expose exactly who is fighting for consumers and who is fighting to preserve monopoly power.”

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DeFi wins some, loses some

Another major point of legislative contention was how much responsibility decentralized finance (DeFi) developers should bear if their platforms are used by bad actors for criminal purposes. TLDR: Dems want stricter rules for devs, GOP says let ‘em cook.

Before the new Banking draft was released, committee member Cynthia Lummis (R-WY) and Senate Finance Committee ranking member Ron Wyden (D-OR) announced the release of the Blockchain Regulatory Certainty Act (BRCA). The five-page bill aims to codify the view that “software developers and infrastructure providers who do not control user funds are not money transmitters under federal law.”

The bill mirrors language that was incorporated into the House’s CLARITY Act, which itself was based on a House bill first proposed way back in 2021. And sure enough, Banking’s new draft incorporates the BRCA language.

However, the current draft’s DeFi language also includes a new section (303) regarding a “special measure relating to certain transmittal of funds” that’s worth discussing.

The measure would empower the U.S. Treasury Secretary to “prohibit, or impose conditions upon, certain transmittals of funds (to be defined by the Secretary by regulation) by any domestic financial institution or domestic financial agency, if such transmittal of funds involves” an international jurisdiction or financial institution deemed to be “of primary money laundering concern in connection with illicit finance through the use of digital assets.”

There’s also a new section (305) that would allow a “temporary hold for certain digital asset transactions.” This hold would allow the Treasury, or any state or federal law enforcement agency to delay the “execution of a transaction, conversion, or withdrawal involving digital assets for a reasonable period of time, not to exceed 30 calendar days, provided that a temporary hold may be extended for an additional 150 calendars days pursuant to a request for such” by the authorities.

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Nothing’s a security!

Another item of note in the Banking bill is the ever-thorny question over which tokens are commodities—and thus regulated by the Commodity Futures Trading Commission (CFTC)—and which are securities that fall under the purview of the Securities and Exchange Commission (SEC).

In Banking’s previous draft, an ‘ancillary asset’ was defined as “an intangible, commercially fungible asset, including a digital commodity, that is offered, sold, or otherwise distributed to a person in connection with the purchase and sale of a security through an arrangement that constitutes an investment contract.”

In other words, any token that’s currently the basis for a U.S.-regulated exchange-traded fund (ETF) isn’t a security. While the BTC and ETH tokens have enjoyed this privilege for a while, last year saw the SEC open the floodgates for crypto-focused ETFs based on Dogecoin, Ripple’s XRP, Solana’s SOL, Litecoin, Chainlink’s LINK, and Hedera’s HBAR.

This approach definitely fits with SEC Chair Paul Atkins’ view that “there are very few, in my mind, tokens that are securities.” Last November, Atkins mulled the idea of issuing a ‘token taxonomy’ that clearly spelled out which tokens are/aren’t securities, but that would seem like wasted effort given the way the Senate appears intent on alleviating the SEC’s workload.

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White House still balking at ethics language

The revised Banking draft doesn’t contain any new language addressing what Democrats call the ‘ethics’ issue, aka their desire to formally prohibit elected officials and their families from profiting off crypto ventures.

This push is explicitly aimed at curbing the highly lucrative crypto operations of President Trump’s family, which accounted for 93% of the Trump Organization’s income in the first half of 2025.

In a Crypto in America interview conducted just prior to the Banking draft’s release, Patrick Witt, exec director of the President’s Council of Advisors for Digital Assets, said “the White House has never been opposed to common sense ethics provisions that apply to all filers.”

But Witt said the White House had made it clear to Dems that “we’re not going to tolerate targeting the president, targeting his family members … we’ve provided that red line to them.”

In response, Semafor’s Brendan Pedersen said it was “very, very likely that this answer … will not fly with Senate Democrats.” Pedersen noted that Banking member Ruben Gallego (D-AZ) had stated that a failure to include the president within the ethics boundaries was a ‘red line’ for Banking’s Dems. (Witt claimed there are Dems who are “more reasonable on this topic” and won’t make this a dealbreaker.)

On Tuesday, Sen. Elizabeth Warren (D-MA) sent a letter to Jonathan Gould, head of the Treasury Department’s Office of the Comptroller of the Currency (OCC), urging him to “delay review” of the application for a national trust bank charter filed last week by the Trump-linked DeFi platform World Liberty Financial (WLF).

Warren wrote Gould last July seeking reassurance that Trump’s “significant financial conflicts of interest do not influence OCC policy.” At the time, Gould refused to answer what he called “hypothetical questions” regarding an entity that wasn’t then subject to OCC supervision.

Warren said that “dismissive response, and your willingness to rubber stamp the President’s dangerous agenda during your tenure as Comptroller, give me no confidence that you will fairly assess [WLF’s trust] application pursuant to the legal standard for approval.”

Warren says that “to mitigate the public’s legitimate concerns regarding Presidential corruption,” Gould shouldn’t take any steps to process the WLF application “until President Trump divests from WLF and eliminates all financial conflicts of interest involving himself or his family and the company.”

Warren didn’t mince words in her conclusion, warning that Gould “must make decisions that benefit the American public—not President Trump’s pocketbook. The integrity of our federal banking system depends on it.”

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Dems not giving up on crypto fundraising

Shifting from the legislative beat, the crypto sector has made no secret of its willingness to spend hundreds of millions of dollars to support blockchain-friendly politicians and punish opponents. Many of the crypto-focused political action committees (PACs) are nakedly supportive of the GOP, while others claim to maintain a fig leaf of bipartisanship.

Enter BlueVault, a new Federal Election Commission-registered ‘conduit’ PAC dedicated to building “political technology to help Democrats win.” BlueVault wants to ensure “secure, compliant access to digital assets and modern tools for engaging donors who choose to give with them.”

BlueVault accepts donations in BTC and the USDC stablecoin issued by Circle (NASDAQ: CRCL), then forwards these donations (along with the FEC-required donor information) to the intended recipient. Additional tokens may be added to this list as the 2026 midterm campaign heats up.

During the 2024 presidential campaign, Trump-supporting PACs were far quicker to start accepting digital asset donations than those supporting his rival Kamala Harris. BlueVault aims to rebalance this scale by providing the infrastructure (for a 3% fee) necessary to start moving blockchain bucks. 

During that 2024 tilt, BlueVault founder Will Schweitzer founded the Crypto4Harris group that sought to both raise funds for the Democratic candidate as well as conduct online town halls with Democratic leaders. BlueVault believes “community is crypto’s superpower” and is therefore seeking to unite “the progressive communities of crypto.”

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Warren not wild about crypto in 401(k) plans

Last August, Trump issued an executive order that directed the SEC to revise its regulations to allow employer-sponsored 401(k) retirement programs to include digital assets in their portfolios. The following month, nine GOP members of the House Committee on Financial Services sent a letter to SEC Chair Paul Atkins expressing their support for this plan.

In November, SEC commissioner Mark Uyeda gave a speech in which he talked up “the case for diversification” in retirement accounts. Uyeda suggested that the overconcentration of major companies in index funds makes “the case for expanding the investment universe to include exposure to alternative investments … even more compelling.” Uyeda added that “democratizing access to alternative assets must be accompanied by fiduciary rigor rather than unsupported fearmongering.”

Enter Sen. Warren, who on January 12 sent a letter to Atkins suggesting Trump’s order “endangers investors by clearing the way for pension funds and retirement accounts to hold volatile crypto assets.” Citing the “recent trillion-dollar nosedive” in token values, Warren suggested there was far more potential downside than upside for investors, “increasing the risk of large losses for participants, most of whom can ill afford them.”

Warren asked Atkins to respond to several pointed questions regarding the 401(k) issue, including whether the SEC’s Division of Risk and Analysis has “assessed the use of manipulative or deceptive practices in crypto markets? If not, does it plan to publish research for retail investor awareness?” Warren requested answers to these questions by January 27.

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CFTC picks its innovators

We’ll close at the CFTC, where new Chair Michael Selig has announced the launch of the new Innovation Advisory Committee (IAC), which is basically a rebrand of the existing Technology Advisory Committee.

Regardless, Selig said the IAC “will play a critical role in advising the Commission on the commercial, economic, and practical considerations of emerging products, platforms, and business models in the financial markets so that it can develop clear rules of the road for the Golden Age of American Financial Markets.”

The IAC’s charter members will be drawn from the CFTC’s new CEO Innovation Council, whose ranks include leaders of crypto firms Bitnomial, Bullish Global (NASDAQ: BLSH), Crypto.com, Gemini (NASDAQ: GEMI), and Kraken. But Selig is open to nominations for additional IAC membership—experience with “artificial intelligence, blockchain, and cloud computing” are net positives—so submit your recommendations by January 31.

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Watch: What’s ahead for crypto regulation? Highlights from Blockchain Futurist Conference 2025