The US Senate Banking Committee voted 15-9 on May 14 to advance the CLARITY Act in a bipartisan manner, sending the bill to the full Senate for consideration. The 309-page draft, released earlier this week, expands on the House version passed in 2025 by a 294-134 margin. Chairman Tim Scott led negotiations that added over 33,000 words to the legislation.
Three-Bucket System for SEC-CFTC Jurisdiction
The bill creates a three-bucket framework dividing digital asset oversight between the SEC and CFTC. Bitcoin and Ether would fall under CFTC jurisdiction once deemed sufficiently decentralized. The SEC retains authority over initial token offerings that qualify as securities. Stablecoins face a mixed regulatory regime involving state and Federal Reserve oversight. The Blockchain Regulatory Certainty Act offers additional protections for DeFi developers and open-source contributors. Opposition from banks and unions centers on financial stability concerns and potential deposit outflows. Supporters include Coinbase, Circle, Ripple, and venture firm Andreessen Horowitz. DeFi safeguard provisions remain contested, and passive yield restrictions have been tightened despite some carve-outs.
Market Uptick Amid Security Incident
Cryptocurrency prices rallied after the committee vote. Bitcoin and Ethereum climbed, while altcoins such as Hyperliquid, XDC, and Canton surged nearly 10%. Sentiment improved on expectations of clearer US rules. However, the Echo Protocol suffered a $77 million exploit via an admin key compromise. Attackers minted 1,000 eBTC tokens and extracted up to $876K before bridging and laundering the funds. The protocol paused operations. CoinDesk's podcast highlighted potential DeFi developer exposure from last-minute bill changes. The SEC is also exploring an innovation exemption for tokenized stock trading platforms.
Path to Law and Analyst Outlook
Analyst Alex Thorn assigns a 75% probability to passage in 2026, with a possible signing around August 3. The bill now needs 60 votes in the Senate and reconciliation with the Agriculture Committee version before reaching the president's desk. Institutional participation could increase as legal clarity improves, while tokenized stock deals link crypto with traditional securities. Despite the positive legislative momentum, DeFi rule changes and security risks like the Echo hack underscore unresolved challenges. Investors are closely watching the Senate floor vote timeline.