Stablecoin fight sharpens before Senate vote

Washington’s push to regulate digital assets has entered a sharper phase after Senator Bernie Moreno accused major banks of trying to block stablecoin competition as Congress prepares for a decisive test of the CLARITY Act this week.

Moreno, a Republican from Ohio and one of the Senate’s most vocal crypto advocates, said the “banking cartel” was “in full panic mode” over legislation that could reshape the relationship between conventional finance and digital money. His intervention followed an intensified lobbying drive by banking groups seeking tighter restrictions on rewards and incentives linked to payment stablecoins.

At the centre of the dispute is H. R. 3633, the Digital Asset Market Clarity Act of 2025, which is scheduled for consideration by the Senate Banking Committee on May 14. The measure seeks to define when digital tokens fall under securities law, when they should be treated as commodities, and how crypto platforms should register with federal regulators. The House of Representatives passed the bill in July 2025 by a bipartisan vote of 294 to 134, but its Senate path remains politically fragile.

The fight has narrowed around stablecoins, digital tokens generally pegged to the dollar and backed by reserves such as Treasury bills, cash or bank deposits. Crypto firms argue that stablecoins can lower payment costs, accelerate settlement and expand access to financial services. Banks counter that poorly drafted rules could encourage deposit flight from regulated lenders into lightly supervised crypto instruments, reducing the credit available to households and businesses.

Banking groups have asked senators to strengthen language preventing crypto firms from offering interest-like payments on stablecoin holdings. They argue that any loophole allowing rewards, rebates or incentives equivalent to yield would create deposit-like products outside the banking system. Crypto advocates say the industry is not trying to recreate bank accounts, but to build a faster payments infrastructure that can compete with legacy settlement networks.

A compromise under discussion would bar passive yield on idle stablecoin balances while permitting rewards linked to actual payment activity. That distinction has become the fulcrum of the Senate debate. For the crypto industry, allowing transaction-based rewards is essential to preserving commercial use cases. For banks, the wording could still open a channel for platforms to attract funds away from insured deposits.

Moreno’s language reflects growing frustration among pro-crypto lawmakers who believe banks are using financial stability arguments to protect incumbency. His comments also signal how digital asset regulation has moved from a niche policy issue to a broader contest over consumer deposits, payment rails and the future structure of finance.

Senate Banking Committee Chairman Tim Scott has put the bill on the committee calendar as Republicans seek to deliver a market-structure framework before election-year politics make cross-party compromise harder. The legislation would expand the Commodity Futures Trading Commission’s role in overseeing digital commodity spot markets while preserving Securities and Exchange Commission authority over assets that meet securities-law tests.

Democratic support remains the decisive variable. Several Democrats have raised concerns over illicit finance, investor protection and potential conflicts of interest linked to crypto policy. Any Senate floor vote would need broader bipartisan backing, particularly given the political sensitivity of digital assets under President Donald Trump, whose administration has embraced a more crypto-friendly posture.

The banking industry’s resistance also comes after stablecoin regulation moved ahead through separate legislation. The earlier GENIUS Act created a federal framework for payment stablecoins, including reserve and oversight requirements. The CLARITY Act goes further by addressing market structure, token classification, exchange registration and the boundaries between securities and commodities regulation.

Global regulators are watching the Senate debate closely. Central bankers in Europe and the United Kingdom have warned that dollar-backed stablecoins could create cross-border stability risks if they grow quickly without common standards. Their concerns centre on convertibility during market stress, the quality of reserves and the possibility that payment activity could migrate outside traditional banking channels.

Digital asset companies see the bill as a turning point after years of enforcement-driven oversight. Coinbase, Circle and other major crypto firms have argued that clear rules would allow compliant platforms to operate without constant legal uncertainty. Market participants also view the measure as a signal that Washington may be moving from regulatory confrontation towards formal integration of crypto into the financial system.