The most significant piece of crypto legislation in US history is hitting turbulence at the worst possible time. With a merged Senate draft of the CLARITY Act potentially days away from release, banking groups and law enforcement organizations are ramping up opposition to key provisions, particularly those governing how stablecoin issuers can offer yield to users.

Galaxy Research recently cut its odds of the bill passing to 50%, down from 60%, citing negotiation stalls between competing Senate committees.

The banking lobby draws its line

On July 13, 2026, a coalition of banking associations sent a pointed message to Senate leaders: tighten Section 404 or face continued opposition. The American Bankers Association and the Independent Community Bankers of America are leading the charge, arguing that stablecoin yield provisions effectively allow crypto companies to mimic traditional bank deposits without the same regulatory guardrails.

Coinbase reported roughly $1.35 billion in stablecoin revenue in 2025, largely stemming from its USDC partnership with Circle. Banks are concerned that if stablecoin issuers can offer something that looks and feels like interest on deposits, consumers might start parking their money in USDC instead of checking accounts. Unlike banks, stablecoin issuers don’t carry FDIC insurance obligations or the same capital requirements.

Coinbase and Circle have argued that activity-based rewards on stablecoins are fundamentally distinct from traditional interest payments.

Where the bill stands

The House passed H.R. 3633 on July 17, 2025, with a bipartisan vote of 294-134. The Senate Banking Committee released updated text on May 12, 2026, then advanced it 15-9 just two days later on May 14.

The legislation splits regulatory authority between the SEC and CFTC. Tokens classified as securities or investment contracts would fall under SEC jurisdiction. Digital commodities built on mature blockchain technology would go to the CFTC. The bill also includes provisions for digital asset platforms, intermediary oversight, DeFi protections, and anti-money laundering compliance requirements.

Senate Banking and Agriculture Committee staffers are reportedly working to produce a merged draft, with leadership eyeing possible floor action before the August recess.

Law enforcement groups have raised concerns about financial officials profiting from digital asset holdings, with reported connections to high-profile figures including President Trump making the topic difficult for legislators to navigate.

What this means for investors

If the CLARITY Act passes with banking-friendly amendments to Section 404, the immediate impact falls squarely on stablecoin business models. For Coinbase, whose stablecoin revenue represented $1.35 billion of its 2025 earnings, restrictive language could force a rethink of its USDC partnership economics.

Investors should watch two specific signals in the coming days. First, whether the merged Senate draft preserves or weakens Section 404’s stablecoin yield provisions. Second, whether Senate leadership commits to a floor vote timeline before recess.