The Senate Banking Committee dropped a 309-page bill on May 11 that would force payment stablecoin issuers to hold 1:1 reserves in short-duration Treasuries, overnight repos, and central bank deposits. The CLARITY Act — the Committee for Legislative Action on Responsible Innovation and Token Yield — is set for a hearing on May 13. If passed, it would redraw the regulatory map for stablecoins in the U.S.
What the bill demands
The legislation is blunt: every stablecoin used for payments must be fully backed by assets that can't stretch beyond 90-day Treasuries, overnight repos, or central bank deposits. No corporate paper. No money market funds. The idea is to kill run risk before it starts. Jurisdiction gets split too — the SEC gets oversight of tokens that look like securities (profit expectations baked in), while the CFTC handles decentralized digital commodities. That divide will matter a lot once enforcement starts.
Circle versus Tether
Circle's USDC already fits the bill's reserve mold. Tether's USDT does not. Tether holds corporate paper and money market funds, which the CLARITY Act explicitly bans. That puts Tether in a tough spot if the bill becomes law. The company hasn't commented publicly on the draft, but the gap between its reserve mix and the new standard is wide.
Bankers push back
The American Bankers Association isn't happy. They oppose yield-bearing stablecoins outright, arguing those products could pull deposits out of insured banks and destabilize mortgage funding. The ABA's stance sets up a fight that goes beyond stablecoin tech — it's about whether banks can compete with tokenized dollars that pay interest.
Offshore angle and capital flows
Galaxy Research points out that most stablecoin growth will happen offshore anyway. Their argument: foreign demand for dollar-denominated stablecoins will channel capital into U.S. Treasuries, offsetting any domestic deposit drain. That view gives the bill's sponsors an economic talking point — tighten stablecoin rules at home, and the capital still flows in, just through a different pipe.
Politics on both sides
Senate Banking Committee Chairman Tim Scott called the bill 'serious, good-faith work' that puts consumer protection and U.S. crypto leadership first. Senator Elizabeth Warren took the opposite line, slamming the bill for lacking ethics provisions tied to what she says is $1.4 billion in crypto gains by the Trump family. That political split will echo through the May 13 hearing.
What happens next: the committee hears testimony on Wednesday. Amendments will follow. The bill's path to the floor is uncertain — but the lines are drawn.
