The CLARITY Act's failure in the Senate has exposed another Republican split over stablecoin yield rules, according to Punchbowl. Senior reporter Brendan Pedersen reported that seven Republicans backed an amendment from Sen. Jerry Moran that would have strengthened stablecoin yield restrictions sought by banking groups, adding another hurdle to the bill's 60-vote path.

The Senate failed to advance the bill on Sept. 15, when the procedural vote ended 49-50, below the 60 votes required under Senate rules to overcome a filibuster and advance the bill. Reuters reported that four Republicans voted against advancing the measure. With the legislation stalled, the SEC and CFTC are moving ahead on separate crypto measures, including tokenized securities relief and proposed market rules.

Stablecoin Yield Becomes a Senate Flashpoint

Stablecoins are digital tokens designed to maintain a steady value, typically pegged to the U.S. dollar, and whether holders may be paid yield on them has become one of the bill's most contested questions. Moran's amendment would have changed the CLARITY Act's rules governing stablecoin yield and rewards. Banking advocates had pushed for tighter restrictions, while crypto industry participants opposed the changes.

The amendment drew more than a dozen cosponsors, including seven Republicans. At the center of the dispute was whether stablecoin rewards could pull deposits away from banks. The Sept. 14 draft included a Treasury "circuit breaker" for substantial deposit flight: the Treasury secretary could determine whether significant deposit flight was occurring, after which the department would write rules restricting stablecoin yields or rewards.

CLARITY Act Expanded During Negotiations

The Senate version grew substantially during negotiations, expanding from an initial 275 pages to roughly 635 pages, with provisions now spanning both SEC and CFTC authority. The draft added provisions involving financial oversight while preserving the SEC's anti-fraud and market manipulation authority. It also added CFTC rulemaking, best-execution requirements, and whistleblower protections.

DeFi provisions addressed software developers, miners, and validators, and ethics provisions expanded to include restrictions involving federal officials and digital assets.

Regulators Move Forward Without New Legislation

The failed vote leaves regulators handling several policy areas through existing authority. Less than 48 hours after the vote, the SEC issued its Innovation Exemption, which allows certain tokenized securities venues and liquidity providers to operate under five-year conditional relief.

The CFTC also issued a no-action letter covering passive software providers and submitted draft crypto market rules to the White House on Sept. 17. The proposal could establish a crypto asset market exchange category and allow leveraged and margined trading.