CLARITY Act Could Unlock 11 Crypto Activities for US Banks Under Senate Plan
A Congressional Research Service report details how the Senate version of the CLARITY Act could allow US banks and credit unions to engage in 11 new crypto activities, including digital asset trading and underwriting.
The Congressional Research Service has detailed the potential new opportunities for US lenders arising from the CLARITY Act, following its Senate review and House passage as H.R. 3633.
According to a report published on September 30 by the Congressional Research Service, digital asset involvement could become permissible for US lenders across 11 distinct areas, including trading and underwriting digital assets.
The CRS noted that the Senate’s proposed text would enable banking institutions and credit unions to perform certain functions without needing to maintain the separation between insured banks and commonly owned subsidiary entities. Some of these authorized actions are presently barred for banks.
Read More: CLARITY Act Stalls in Senate as Lummis Blames Democrats for Failed Crypto Vote
Under existing regulations, banks are restricted to underwriting and trading a limited selection of securities. The Senate proposal would expand the types of digital assets that banking companies and credit unions are permitted to trade and underwrite.
House and Senate CLARITY Act Versions Take Different Paths
The version passed by the House is more restrictive. It would only allow banks to integrate blockchain and related digital technologies into their existing operations, leaving other crypto-related functions to nonbank subsidiaries belonging to financial holding companies.
Conversely, the legislation advanced by the Senate sanctions 11 specific activities for both banks and credit unions. The CRS highlighted that the Senate measure eliminates any differentiation between operations categorized as the “business of banking” versus those deemed “financial in nature.”
Senator Cynthia Lummis suggested that the legislation would permit US banks to purchase and retain Bitcoin, thereby boosting overall demand for the cryptocurrency. However, these forecasts regarding an upward impact on Bitcoin prices remain unverified.
On September 15, the Senate declined to advance H.R. 3633 for debate when a cloture vote yielded a 49-50 tally, falling short of the required 60 votes. Although this outcome did not represent a final rejection of the measure, senators have since indicated that further discussions remain feasible.
Stablecoin Rules Advance as Crypto Market Structure Remains Unsettled
Discussions around the bill involved anxieties over stablecoin rewards. Banking associations voiced concerns that these rewards mimic and compete with traditional bank interest, potentially drawing funds away from bank deposits and loans. Additionally, multiple state attorneys general opposed the legislation, arguing it could disrupt state-level securities oversight.
Simultaneously, the Federal Reserve is proceeding with the rollout of the GENIUS Act. In a proposal issued on September 24, the Fed outlined regulations that would mandate reserve-backed backing for supervised payment stablecoins.
Permissible reserves for payment stablecoins would comprise short-term Treasury securities alongside other high-quality liquid assets. Additional standards put forward for payment stablecoins encompass capital requirements and risk management protocols.
A separate Fed proposal establishes an application framework for supervised bank holding companies wishing to authorize subsidiaries or affiliates to issue payment stablecoins. Submissions would require business plans and accompanying documentation, with the proposal also outlining procedures for appeals and final determinations.
Read More: CLARITY Act Stalls. Paul Atkins and Michael Selig Move Ahead With New Crypto Rules
The legislative stall surrounding the CLARITY Act leaves existing compliance duties unchanged. Law-abiding cryptocurrency operators must maintain adherence to established requirements concerning the Bank Secrecy Act, customer identification, sanctions, transaction monitoring, and the reporting of suspicious activities.
