The crypto industry’s best chance for regulatory clarity in years now hinges on a single vote in May, as a stalemate over stablecoin yields threatens to freeze legislation until 2027.
A landmark bill to regulate cryptocurrency markets in the United States has been pushed to a May showdown after Senator Thom Tillis urged the Senate Banking Committee to delay a planned April markup. The delay, reported by Punchbowl News on April 20, centers on a fierce dispute between traditional banks and crypto firms over whether stablecoin providers can offer yield, a conflict that now threatens to derail the entire legislative effort before the November midterms.
“It’s very important to me not to accelerate things, to hear everybody, and give them a rational basis for what we do accept,” Tillis, a Republican from North Carolina, told reporters. He has been leading the negotiations to find a compromise on the contentious yield provisions.
The delay has solidified pessimism in prediction markets, with Polymarket odds on the CLARITY Act passing in 2026 falling from 82 percent in February to just 60 percent. The core of the bill, which passed the House of Representatives in July 2025, aims to provide a comprehensive framework for digital assets, but it has been bogged down in the Senate by the stablecoin debate.
At stake is whether the U.S. will establish clear rules for the $255 billion stablecoin market or leave it to regulation by enforcement. If the Senate fails to advance the bill out of committee by May, analysts warn the legislative calendar, shortened by the upcoming midterm elections, makes passage in 2026 highly unlikely. This could leave the industry in regulatory limbo and potentially empower crypto-skeptics like Senator Elizabeth Warren, who could become chair of the Banking Committee if Democrats win the Senate.
The banking industry, led by the American Bankers Association (ABA), is lobbying for what it calls an “airtight prohibition” on any interest-like payments for stablecoins. Their argument is that yield-bearing stablecoins could trigger a massive outflow of deposits from traditional banks, threatening their lending capacity.
This strategy mirrors the “margarine laws” of the late 1800s, where the dairy industry, unable to compete on price with the new butter substitute, lobbied to have margarine dyed pink to make it commercially unappealing. Similarly, banks are asking Congress to legally mandate that stablecoins remain a less attractive product than a traditional bank account. The North Carolina Bankers Association has circulated scripts urging members to demand a ban on anything “economically or functionally equivalent” to interest.
This approach was tried before with Regulation Q in 1933, which banned interest on checking accounts. The result was the creation of the $7.6 trillion money market fund industry, which offered a functionally equivalent product in a different wrapper.
A powerful coalition has formed to counter the banking lobby’s push. The White House Council of Economic Advisers (CEA) released a report in April directly challenging the ABA’s claims. The study concluded that a ban on stablecoin yield would cost American consumers an estimated $800 million annually while increasing total U.S. bank lending by a negligible 0.02 percent.
The report provided political cover for key figures to back the bill. Treasury Secretary Scott Bessent and SEC Chair Paul Atkins have both publicly called on Congress to pass the legislation. Most notably, Coinbase CEO Brian Armstrong, who had twice helped stall the bill over its yield provisions, reversed course on April 9 and endorsed it, stating, “It’s time to pass the Clarity Act.”
This united front from regulators and the industry’s largest public company has significantly improved the bill’s prospects, but the final hurdle remains in the Senate. The proposed compromise would ban passive, interest-like rewards for simply holding stablecoins but allow activity-based rewards tied to payments and platform use.
The legislative clock is the bill's greatest enemy. The Senate has only 18 working weeks left before its October 5 midterm recess. For the CLARITY Act to become law, it must clear the Banking Committee, secure a 60-vote majority on the Senate floor, be reconciled with the House version, and then be signed by the President. According to Paradigm’s Justin Slaughter, the bill must clear committee by mid-May to have a realistic shot at a floor vote before the summer.
For assets like XRP, the delay is a direct headwind. Its classification as a commodity remains a regulatory opinion, not law, until the CLARITY Act passes. A Coinbase and EY-Parthenon survey found that while 25 percent of institutional investors plan to add XRP in 2026, 65 percent cited the lack of regulatory clarity as the primary barrier. Without that legal certainty, major Ripple partnerships remain on hold and analysts expect the XRP price to stay capped between $1.00 and $1.50.
While the crypto industry has built its strongest-ever coalition to push for clear rules, the banking lobby's deep influence and the unforgiving Senate calendar present a formidable challenge. The next move belongs to Senate Banking Committee Chairman Tim Scott, and whether he schedules a markup in May will likely determine if the U.S. gets a crypto framework this year or is forced to wait until 2027.
This article is for informational purposes only and does not constitute investment advice.
