Senate Banking Committee vote is key: differences in deliberation policies with the House will influence the future of crypto regulation

The regulatory landscape for cryptocurrencies in the United States is approaching a major turning point. As the Senate Banking Committee and the House of Representatives make progress on the Digital Asset Market Structure Bill (CLARITY Act) at different paces, the differing positions of the two chambers are becoming a decisive factor in the final passage of the legislation. This vote has the potential to eliminate the “gray zone” between the crypto industry and traditional finance, and its outcome will shape the development trajectory of the global crypto market over the next decade.

Divergent Approaches of the Senate and House: Committee Authority Boundaries and Hearing Schedules

While the Senate Banking Committee is proceeding with the CLARITY Act as scheduled, the House Agriculture Committee (note: the correct name is the House Agriculture Committee) has postponed hearings until late January due to the lack of bipartisan consensus on DeFi definitions and interest on stablecoins. The differences between these committees reflect more than just scheduling—they embody fundamental disagreements over regulatory philosophy.

Proactive Stance of the Senate Banking Committee

Led by Chairman Tim Scott, the Senate Banking Committee is focused on clearly limiting the SEC’s authority. Currently, the SEC considers tokens securities indefinitely based on vague standards like “investment expectations,” but the bill aims to end this status quo and establish a “clear pathway for securities to become commodities.” This approach prioritizes market certainty, with SEC Chair Gary Gensler’s counterpart, Paul Atkins, supporting similar principles.

Cautious Approach of the House Agriculture Committee

In contrast, Chairman Glenn “G.T.” Bousley’s House Agriculture Committee has decided to delay hearings, citing the need for more careful consideration of the CFTC’s expanded authority and DeFi definitions. This difference stems from the scope of their respective jurisdictions: the Senate Banking Committee deals primarily with securities overseen by the SEC, while the House Agriculture Committee involves the CFTC’s domain over commodities, requiring more time to coordinate with stakeholders.

Signals from SEC Chair’s Remarks Indicate Senate’s Direction

On January 13, Paul Atkins stated that increasing market certainty aligns with President Trump’s vision of making the U.S. “the world’s crypto capital,” expressing optimism that the bill will be approved and signed into law within the year. This signals strong support for the Senate’s approach and suggests regulatory agencies are leaning toward a more cooperative stance with the industry.

Frontline of Deposit Defense: Bank Industry Pressure on Stablecoin Interest

Conflicts of interest between the crypto industry and traditional finance are most evident in the issue of stablecoin interest payments. The earlier “GENIUS Act” banned interest payments by stablecoin issuers but did not restrict distributors, provoking strong opposition from the banking sector.

Three Major Concerns of the Banking Industry

The American Bankers Association (ABA) warns that if stablecoin yields continue to surpass traditional deposit rates, up to $6.6 trillion in bank deposits could flow out, risking a severe decline in regional banks’ lending capacity. This isn’t just about moving funds; it threatens the entire regional economy, including small businesses, farmers, students, and homebuyers.

Furthermore, ABA points out the unfairness of stablecoins being marketed as equivalent to bank deposits without the federal deposit insurance provided by the FDIC, exposing consumers to financial risks and calling for regulatory intervention.

Crypto Industry’s Counterattack and International Context

Faryar Shirzad, Coinbase’s Chief Policy Officer, has countered these claims with scientific evidence, citing independent research from Charles River Associates and Cornell University showing no significant correlation between stablecoin growth and bank deposit outflows, and that yields need to reach 6% before substantial impact occurs.

Internationally, this issue is even more critical. With China announcing interest payments on the digital yuan, if the U.S. weakens stablecoin competitiveness through banking lobbying, it risks losing global leadership in digital currency and even the dollar’s dominance. Alexander Greeve, Vice President of Government Affairs, describes the banking industry’s demands as “false and dangerous” political interference, emphasizing the gravity of these concerns.

Legal Responsibilities of DeFi Developers: Is “Code” a “Financial Service”?

This is the most technically complex aspect of the legislation, and the primary reason the House Agriculture Committee delayed hearings. The core issue is whether smart contract developers should bear criminal liability for the automated execution of their code.

Risks of Regulatory Interpretation

The DOJ has previously prosecuted Tornado Cash co-founders under the “Unlicensed Money Transmitter” law, based on the premise that “code is an intermediary,” and that developers who create and deploy code are establishing “automatic money transfer operations” and should be responsible for subsequent transactions.

This interpretation poses a fundamental threat to DeFi innovation. Smart contracts, once deployed, are immutable and self-executing; developers cannot halt transactions or freeze assets, effectively losing control over the code’s execution.

Logical Contradictions and International Competitiveness

Organizations like the DeFi Education Fund argue that this legal interpretation is a logical paradox—if traditional financial institutions are responsible for compliance because they have “substantial control” over transactions, then requiring DeFi developers to bear similar responsibility is akin to demanding vehicle manufacturers be criminally liable for every speeding violation on the road.

If the bill adopts this strict definition, the U.S. risks falling behind in the global race to develop next-generation financial infrastructure, with significant talent and R&D capital potentially leaving the country.

Ethical Clauses and Political Maneuvering: Conflicts of Interest in the Trump Family

As World Liberty Financial (WLF) and its stablecoin USD1 rapidly grow to a market cap of $3.4 billion, ethical concerns are influencing bipartisan consensus on the CLARITY Act.

Conflict of Interest Concerns

WLF’s affiliates recently applied for a “National Trust Bank License” with the OCC, creating a situation where Trump’s crypto company is overseen by regulators appointed by him.

Democratic Senators, notably Elizabeth Warren, are pushing to include “ethics clauses” in the bill, prohibiting senior federal officials and their immediate family from personally profiting from digital asset companies while in office. The House previously avoided this issue, but Senate Democrats have made it clear they will block final passage unless such restrictions are included.

Politics and Technology at the Crossroads

This ethics clause issue is not merely a moral debate but a key variable in securing bipartisan support for the bill. The January 15 vote reflects deep political negotiations, with implications beyond the technical scope.

How This Vote Will Shape the Next Decade of the Crypto Market

The outcome of the CLARITY Act vote will have profound effects on three levels:

First, Regulatory Certainty and Capital Inflows

Clarifying the boundary between SEC and CFTC authority will end “enforcement chaos,” unlocking trillions of dollars of institutional capital into digital assets. When that happens, cryptocurrencies will transition from fringe speculative assets to mainstream financial instruments.

Second, Geopolitical Competition over Innovation

Restrictions on stablecoin interest and the definition of DeFi developer responsibilities will test how tolerant the U.S. is of technological innovation. Overly conservative protections or harsh criminalization could lead to talent outflows, while maintaining flexibility could secure the U.S. as the “world’s crypto capital” and strengthen dollar dominance in the digital era.

Third, Symbol of Deep Integration of Web3 and Traditional Power

From the battle over stablecoin profits to ethics clauses involving the Trump family, crypto is no longer just a tech utopia but a central arena of power and capital struggles. As the Senate and House diverge in their approaches, this vote marks a historic moment that will determine the next decade’s trajectory for both the crypto industry and traditional finance.