Welcome to issue 18 of Stablecoin State.
The weekly stablecoin brief for finance leaders, builders and fintech professionals who understand that stablecoins are a monetary infrastructure story - not a crypto story.
The clock just ran down on the CLARITY Act being voted on in Washington before the Senate broke for summer recess (August 10th.)
It was pitched as the first comprehensive federal framework for the cryptocurrency industry in US history, and its passage would have been a huge win for both the Trump administration and US crypto industry.
It did not make it to a vote.
But its chances of becoming law may not be completely dead.
In the small hours of Saturday morning, after an overnight session that ran past the Friday the Senate was meant to leave, Senate Majority Leader John Thune filed cloture on the motion to proceed.
That sets up a vote on September 15th on whether to take the bill up, giving CLARITY a last shot at becoming law before the whole political class turns its attention to the November midterms.
Passage, if it comes, is several steps beyond that.
So, what is the hold up?
Two major issues remain: ethics and stablecoins.
Before we expand on those and offer thoughts on what all this means for the growth of the industry, a quick refresher on CLARITY, in the form of the questions clients have most often asked us about it this past year.
Stablecoin State is produced by AdaptXion - treasury, digital asset strategy and AI for rates and treasury teams.
What exactly is the CLARITY Act?
In short, it’s a comprehensive federal framework for the US cryptocurrency industry.
It clarifies, among other issues:
What constitutes a commodity or security
Who regulates what between two competing regulators (the SEC v the CFTC)
How blockchain startups can raise capital in the US
It was passed by the House of Representatives last July (294-134) and has made it through the Senate Banking Committee but has been the subject of increasingly heated negotiations for over a year.
How is it different to the GENIUS Act?
The GENIUS Act is already law and only covers stablecoins.
It sets out the registration, reserve and transparency requirements of anyone wanting to issue a stablecoin in the US as well as guaranteeing consumer protections.
A key provision was that stablecoins cannot pay interest directly to holders.
It was signed into law on 18th July 2025 without meaningful opposition.
Why the difficulty in passing CLARITY versus GENIUS?
Three reasons, in rising order of importance:
Scope
GENIUS set rules for a single asset class.
CLARITY attempts to cover the entire industry - a much bigger task.
Political Calculus
The political landscape has changed markedly in a year, in the wake of the US-Israeli War with Iran and the resurgence of inflation in the US.
Inflation is now the top issue for voters, and the President's net approval rating has fallen sharply.
That changes the calculus heading into the November midterms where every seat in the House and about a third of the Senate are contested, and no one wants a difficult crypto vote on their record.
Competing interests
GENIUS asked almost no one to give anything up: it wrote rules for a new instrument.
CLARITY redistributes power, between two regulators, between banks and the platforms coming for their deposits, and around a President with a large personal stake in the outcome.
GENIUS was additive.
CLARITY is redistributive.
That is why one passed in a fortnight and the other has taken a year and still might not.
What does the bill need to pass?
Republicans currently hold the majority in the Senate 53/47.
The bill needs a supermajority to progress (60 votes) so that is at least 7 Democratic Senate votes assuming every Republican vote holds (a big assumption.)
That arithmetic (and that of the House of Representatives) will undoubtedly change after the mid-term elections on November 3rd.
Who is pushing the bill?
The US crypto and tech industries, who argue that the absence of a comprehensive framework will keep discouraging innovation and investment in a strategically important asset class.
And the Trump administration, elected partly on the promise to make the US the ‘crypto capital of the world’ and backed heavily by crypto and tech interests in the 2024 election cycle.
And who is against?
Senate Democrats, who point to Donald Trump’s reported $1.4Bn income from crypto sources in the last year as a plain conflict of interest. They argue that his family is profiting from an industry whose rules he is writing.
And much of the US banking sector, who see parts of the cryptocurrency industry as direct competitors to their deposit funding and payments businesses.
THE RULEBOOK
Kevin Bacon as Captain Jack Ross in A Few Good Men (1992)
In A Few Good Men, key rules of living on the marine base were never written down.
One, importantly, involved a Code Red.
It was the law of the base while officially not existing: an entire chain of command obeyed a rule that appeared in no manual, and was crystal clear on it.
The US crypto industry would argue it has run on a Code Red for over a decade.
Not a rulebook, an understanding: regulation by enforcement by the SEC.
No written rules to follow for tokens, protocols or exchanges. Just lawsuits, Wells notices, and settlements that set the boundaries after the fact.
Some examples:
The SEC allowed Coinbase to go public on Nasdaq in 2021, then sued the same company two years later for operating an unregistered exchange.
It let Ripple sell XRP into public markets for years, then charged those sales as unregistered securities, and even then a court held the ones made over exchanges were not securities after all.
It let Kraken run a staking service for years, then closed it down with a settlement and a $30m penalty. Its own commissioner dissented, called it regulation by enforcement, and noted there had been no way to register the product even if Kraken had tried.
The effect was to introduce huge US regulatory risk to anyone building in blockchain due to the lack of a legal framework outlining the rules of the game.
Without clear guidelines, it is argued that other jurisdictions (Singapore, the UAE) are able to attract talent and capital in an area of significant strategic importance to the US.
CLARITY was meant to address this.
The two issues that remain outstanding are major obstacles given what is at stake for the competing interests and those stakes are measured in trillions.
1. ETHICS
Discussions around CLARITY, even for those who believe that the US strategic interest is served by being a leader in blockchain technology, have been overshadowed by the unprecedented scale of the Trump family’s activities in crypto since the beginning of his second term.
As reported by ABC News last month, Donald Trump earned more than $1.4Bn of income from cryptocurrency ventures in 2025.
According to filings, $636m of this came from the proceeds of the $TRUMP memecoin which was launched 3 days before his inauguration in January 2025.
$TRUMP may have since dropped 97% from its peak. But its launch allowed anyone in the world, from anywhere, to deposit money straight into the incoming president’s own venture.
Top holders were rewarded with access to White House dinners during the president’s second term, among other forms of access to the executive branch.
Another $187m came from the sale of a 49% stake in World Liberty Financial, a Trump-linked venture, to an Emirati sovereign wealth fund in the days leading up to his inauguration.
While both the legality and propriety of these transactions are something for the US legal system and electorate to rule on, it is unsurprising that Senate Democrats are insisting that clear lines be drawn between lawmakers and the asset classes they have influence over.
Current position
Both sides now accept that a sitting official should not be able to mint a token.
The White House agreed, late last month, to a Republican draft barring public officials and their spouses from issuing or sponsoring digital assets. Trump signed off on it, which surprised people, given whose business it describes.
The fight is over three things:
who enforces the ban
how long it lasts
how far it reaches
Enforcement is the real deadlock.
The Republican draft leaves it to the Justice Department alone: Democrats will not have it.
Their reasoning is blunt: a department appointed by the President is not going to prosecute the President, so they want state attorneys general given the power instead.
One of the holdouts, Senator Alsobrooks, called this Justice Department too unserious to be trusted with it. That is the whole argument in a line.
The other two objections follow from the same logic.
The draft sunsets in January 2029, when the term ends, which Democrats read as an amnesty rather than a rule.
And a ban on issuing new tokens does nothing about holding old ones, so a bipartisan counteroffer from Senators Tillis and Gallego would go further and force officials to divest, or move their holdings into blind trusts they do not control.
That counteroffer went to the White House in late July. It came back unanswered. The silence is why the vote now sits in September, and not in the week just gone.
So they agree on the easy part, that a president should not mint tokens.
They are stuck on the only part that counts.
Who makes him stop?
2. STABLECOINS
Circle celebrates its listing on the NYSE in June 2025
GENIUS stopped a stablecoin issuer from paying interest to the people who hold its coin. It said nothing about the exchange that holds the coin for them.
The scope was limited to stablecoin issuers.
And the market found that gap quickly.
Coinbase, the largest crypto exchange in the US, pays holders of USDC around 3.5 per cent a year on balances sitting in its app.
It does not call this interest. It calls it a reward.
And it can pay it because it does not issue USDC at all. Circle does.
Circle earns the yield on the Treasuries backing the coin, Coinbase takes roughly half of that reserve income under a revenue-sharing deal, and then hands some of its share back to the holder. The issuer pays nothing. The distributor pays instead.
This starts to look a lot like a deposit, run by a company that is not a bank (or regulated like one.)
This is a huge problem for traditional banks who rely on deposit funding as a cornerstone of their funding model. They have lobbied hard against yield-bearing stablecoins chiefly through the American Bankers Association (ABA.)
Current position
CLARITY is supposed to close this gap in two ways, via Section 404.
First, the scope widens - the ban now reaches ‘covered parties’ defined as DASPs (Digital Asset Service Providers) and their affiliates which means that exchanges, brokers, dealers and custodians cannot pay rewards on passive balances.
Secondly, and importantly, it draws a line.
No yield (or rewards) can be paid on passive balances that resemble an idle bank deposit.
But activity-based rewards are permitted.
This allows interest-like ‘rewards’ to be paid on
Spending
Staking
Trading
Transfers
The line between what constitutes active and passive is still being fought over, with US banks unwilling to cede ground on a law that would potentially make it tougher for them to retain deposit funding or pay a higher price for it.
ARE WE CLEAR?
So, what happens if Sep 15th comes and goes with nothing?
For a start, the industry does not immediately fall back into the enforcement years.
This SEC dropped those cases and is writing friendlier rules of its own: Coinbase is not being sued this year, and neither is Ripple.
The relief is real: it is just not law.
Rules made by one administration can be unmade by the next: a statute cannot. So, without CLARITY the industry keeps its clarity on loan, granted by a regulator that happens to be friendly and revocable by one that is not.
And the calendar does the rest.
A dozen working days after the vote, the midterms swallow the rest of the year, and a market-structure law waits on a Congress that doesn’t exist yet.
Then the part that we care about.
If CLARITY fails, Section 404 fails with it.
No passive-yield ban. No widened scope. No circuit breaker.
Coinbase keeps paying 3.5 per cent on idle balances, and nothing forces it into a use-based reward. Blocking the bill does not necessarily protect the traditional deposit bases of the US banks.
Which returns us to the question the film turns on.
Are we clear?
Not yet.
Perhaps not this year.
And for the people blocking it, that may be the point. An unwritten rule forces no one to concede anything on the record. It lets the President keep his investments, the banks keep their story, and the industry keep its borrowed permission to grow (for now.)
Stablecoins already have their law in GENIUS and are positioned to grow regardless, but perhaps the wider crypto industry will have to wait longer for clarity around CLARITY.
-Thanks for reading.
Mark McKendry
Founder, AdaptXion
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