Senate Set to Vote on Crypto Clarity Act as Stablecoin Reward Ban Sparks Bank-Crypto Clash

The legislation aims to end a jurisdictional tug‑of‑war between the SEC and CFTC over digital assets. By clarifying whether a token is a security or commodity, the act would tell firms which regulator oversees issuance, trading and custody. Supporters say this certainty could unlock institutional investment; critics warn it may favor one regulator over the other.

Senator Tim Scott, chairman of the Senate Banking Committee, announced the session will take place in Washington, D.C. on May 14 at 10:30 a.m. ET (1430 GMT). The bill’s core provision would prohibit third parties from paying interest on stablecoins held purely as reserves, treating them akin to bank deposits, while permitting interest or rewards when those stablecoins are used for payments or transfers. In the market, Bitcoin (BTC) traded at $27,400, up 1.2% over the past 24 hours with a market capitalization of roughly $540 billion; Ethereum (ETH) stood at $1,850, down 0.5%, market cap about $220 billion. The two largest stablecoins, USDT and USDC, held combined reserves of roughly $110 billion, and any restriction on idle‑coin yields could shift tens of billions of dollars in potential returns.

Banks argue the ban protects their deposit base from a possible flight to higher‑yielding crypto products, while crypto firms say the restriction limits competition and stifles innovation in yield‑generating services. If passed, the act would give regulators a clear rulebook, potentially reducing legal risk for token issuers and prompting traditional banks to explore stablecoin partnerships under the new framework. Watch for the committee’s vote outcome and any subsequent floor debate, as the decision could influence stablecoin yields, bank‑crypto collaboration and broader digital‑asset market trends in the coming months.