The Senate’s failure to advance the crypto market structure bill known as the CLARITY Act handed banks a lobbying victory, but it also leaves large and small institutions operating under the same regulatory status quo they have known for years.
All Democrats, including those who helped draft significant portions of the bill, joined several Republicans in voting against bringing the measure to the floor. According to people familiar with key lawmakers’ thinking, more Republicans could have defected following banking industry lobbying. The vote marked a decisive defeat for the crypto industry, which had spent hundreds of millions during the 2024 election cycle to install sympathetic lawmakers and pass sweeping market structure legislation.
For banks, the result is a familiar one: the bill’s collapse avoids new permissibility rules that would have allowed banks to engage in a broader range of crypto activities, while also preserving the existing framework that banks have learned to navigate.
A Procedural Opening, but a Narrow One
Sen. Thom Tillis, R-N.C., voted against cloture but filed a motion to recommit, a procedural move that allows Republicans to bring the bill back to the Senate floor for another attempt. That path would only be pursued if Republicans reach an agreement with key Democrats on ethics provisions and durable enforcement mechanisms, meaning CLARITY’s passage remains technically possible.
“From a technical perspective, yes, the legislation could be brought up again,” said Mark Hays, an associate director at Americans for Financial Reform. “You saw Senator Tillis switch his vote at the last minute to allow for that procedurally, so there is a chance that some elements of CLARITY, as considered by the Senate — or even as passed by the House — could find their way into the lame duck session.”
Hays cautioned that substantive work is unlikely to resume until the new Congress is sworn in. “Procedurally, that’s going to be really difficult, just because a lame duck is a challenging period, no matter what the outcome of the election is,” he said. “So it’s dicey in terms of trying to sort that out, but that unpredictability certainly makes for interesting surprises from a policy perspective.”
House Majority Whip Tom Emmer said before the vote that if the bill failed, he would push to pass it during the lame duck session because the measure “absolutely has to get done by the end of the year.”
Shifting Political Winds and Banking’s Calculus
If polls are accurate, Democrats have an inside track to winning back both the House and Senate in the 2026 midterm elections. Although crypto industry spending has benefited some Democrats, perceived conflicts of interest between President Donald Trump and the crypto sector — which comprises a considerable portion of his personal wealth — will likely prevent most Democrats from aligning too closely with crypto in the future.
A Democratic victory would create both threats and opportunities for banks. Sens. Jack Reed, D-R.I., and Tina Smith, D-Minn., offered an amendment during a markup that included banks’ preferred language banning yield on stablecoin holdings, but the amendment was denied a vote due to maneuvers by Senate Banking Committee Chairman Tim Scott, R-S.C.
If Democrats win the Senate, banks would likely face a Senate Banking Committee chairmanship under Sen. Elizabeth Warren, D-Mass., one of the lawmakers most concerned about crypto’s expanding role in the banking system. She would almost certainly codify Democrats’ ethics concerns into any future crypto market structure bill and include provisions to more fully insulate the banking system from the crypto industry.
“The [CLARITY Act] would give banks a green light to use Americans’ bank deposits to engage in a brand-new list of risky crypto activities: lending against crypto as collateral, buying crypto directly, trading crypto derivatives, operating blockchain nodes, selling crypto software, the list goes on and on,” Warren said on the Senate floor ahead of the vote. “Think about how the price of crypto shot up and down and up and down in the last couple of years alone, and then imagine what happens when the biggest banks in America use the money in your savings account to load up on that kind of crypto.”
Steve Gannon, a partner at Davis Wright Tremaine, said Democrats might want to advance some form of crypto legislation to the floor, but a bipartisan law looks increasingly unlikely in the near future.
“If the polls are right and the Democrats take at least one chamber, they could put crypto legislation on the floor just to try to make debating points,” he said. “But it’s very unlikely that you’re going to pass anything. They would need Republican votes in the Senate to get past cloture, and given the experience we just went through, that’s not too likely.”
Tokenization Continues Apace
Gannon said the banking industry will plan to operate under the status quo, understanding that crypto companies will likely want to ramp up yield-like reward programs.
“If I am a good-size bank — let’s say over $150 billion in assets — then I’m really studying how crypto infrastructure is going to impact me,” he said. “How is it going to affect my ability, within the corporate treasury, to control costs, to avoid having to pre-position collateral?”
He said banks will examine how to adapt their businesses as different kinds of assets become tokenized.
“Let’s say in the wealth management space, if all of a sudden I’ve got a change from … clients who are trading stocks to trading tokenized stocks — what does that mean for me?” Gannon said. “How do I have to pivot and deal with that? Because that’s not something I can control on my own.”
For smaller banks, the math is more complicated. They need to track deposit movements more carefully as stablecoin companies consider yield-like programs, and they will have to find third-party providers to match capabilities that larger banks can develop internally.
“I’m going to be concerned about having to onboard in some way, either internally or through third parties, the talent and the resources I’m going to need to be able to offer the crypto tools that I need to offer in order to control my expenses better,” Gannon said.