Clarity Act Faces Narrow Pre-Midterm Window, JPMorgan Says

JPMorgan analysts led by Nikolaos Panigirtzoglou wrote that the legislative window to pass the Clarity Act is narrowing as the U.S. midterm elections approach. The bill cleared the Senate Banking Committee on May 14 but still must win 60 votes in the full Senate, be reconciled with the House and receive the president's signature.

A central issue is how the legislation treats stablecoin yield. The draft would bar passive yield-interest paid simply for holding stablecoin balances-while allowing rewards tied to user activity such as payments, transactions, loyalty programs or trading incentives. The analysts noted the bill's language is not explicit in banning interest on balances, leaving room for differing interpretations.

Banks are seeking tighter language to prevent crypto platforms from offering products that resemble unregulated savings accounts. Crypto firms want flexibility to offer yield or rewards on stablecoin products. JPMorgan flagged the stablecoin yield provision as the ‘core dispute' because it could affect whether stablecoins function as substitutes for insured bank deposits.

JPMorgan wrote that strict limits on passive stablecoin yield would likely accelerate a shift of idle crypto cash into tokenized Treasuries, digital money market funds or tokenized deposits. That change could create headwinds for crypto-native firms that have lobbied to provide yield on stablecoin balances.

Treasury Secretary Scott Bessent has urged lawmakers to back the Clarity Act and called for passage this summer. The Blockchain Association and a coalition of former national security and law enforcement officials have asked Senate leaders to advance the bill. JPMorgan CEO Jamie Dimon has expressed unhappiness with the current draft and warned that banks would oppose allowing interest-like products on crypto platforms without bank-style regulation. TD Cowen's Jaret Seiberg remains pessimistic the bill will pass this year, citing political obstacles.

The analysts wrote that timing could matter: a compromise reached before the midterms could differ meaningfully from a post-midterm version as political incentives change. They added that several high-friction steps remain and could delay or alter the final bill.

The Clarity Act seeks to set rules for stablecoins and crypto platforms and to keep stablecoins focused on payments and settlement rather than savings. The bill's final wording on yield will influence short-term flows in crypto markets, the analysts said.