Senate crafts third amendment to crypto bill

TLDR

US senators are working on a third major rewrite of the Digital Asset Market Clarity (CLARITY) Act to unlock a stalled crypto market structure bill.

1. The amendment round focuses on DeFi developer protections and controversial rules on stablecoin rewards on idle balances.
2. The bill would clarify when tokens are securities or commodities and give the CFTC clearer authority, shifting away from enforcement-by-lawsuit.
3. Key risks are a bank versus crypto industry fight over yields and whether the Senate can agree on text in time for an April markup.

Deep Dive

1. What This Third Amendment Is Changing

Senator Cynthia Lummis says the market structure bill now in the Senate is undergoing a third amendment to refine protections for DeFi and open source developers, aiming for the strongest protection ever enacted for them. Recent drafts work to ensure non custodial software developers and validators are not treated as money transmitters or financial institutions, directly addressing fears that code authors could face KYC style obligations just for publishing tools. At the same time, the bill continues to tackle core market structure issues like token classification, spot market oversight and developer liability in one package instead of leaving it all to regulators and courts.

2. Stablecoin Yield Fight And Market Impact

The same bill is stuck on how to regulate stablecoin rewards. Senators have floated language that would broadly restrict interest like yield on idle stablecoin balances, while still allowing activity based incentives such as promos or loyalty points. Banks argue generous stablecoin yields could drain deposits, while firms like Coinbase have signaled they cannot support draft text that effectively bans passive rewards, and are preparing a coordinated counterproposal to soften the restrictions. This battle has already hit sentiment, with reports of sharp moves in stablecoin related stocks when stricter language surfaced.

3. Timeline, Odds And Key Risks

The Senate Banking Committee is expected to release updated legislative text and then aim for an April markup, but the stablecoin section and DeFi provisions remain moving targets. The House already passed its version in 2025, so any Senate bill would still need to be reconciled before reaching the president. Prediction markets currently price the odds of the CLARITY Act becoming law in 2026 at a bit over fifty percent, reflecting both strong political will and real risk that bank industry pushback or crypto industry opposition could derail the compromise.

Conclusion

The third amendment signals that the Senate is still trying to salvage a comprehensive crypto market structure bill that protects DeFi developers while tightening rules around stablecoin yield. Progress here could finally replace regulation by enforcement with clearer statutory rules, but the outcome hinges on whether lawmakers can craft stablecoin and developer language that both banks and major crypto platforms can live with.