The Congressional Research Service has identified 11 categories of crypto activities that the Senate-reported CLARITY Act would permit for U.S. banking organizations and credit unions, including digital asset underwriting and dealing.
Summary
- 11 crypto activity categories would become permissible under the Senate-reported text, according to CRS.
- The report says proposed underwriting permissions exceed banks’ authority in comparable traditional securities markets.
- Banking associations have opposed stablecoin rewards they believe could draw deposits away from lenders.
- Federal Reserve stablecoin rulemaking has continued under the GENIUS Act despite the stalled CLARITY legislation.
The Congressional Research Service published its analysis, “Crypto and Bank-Permissible Activities,” on Sep. 30, examining how competing versions of H.R. 3633 would change banks’ authority to conduct digital asset business.
According to the nonpartisan research service, the Senate-reported bill would make the 11 activity categories available across banking organizations and credit unions without preserving the existing distinction between activities conducted inside insured banks and those assigned to nonbank subsidiaries.
The report identifies digital asset underwriting and dealing as an example of permissions that would exceed banks’ current authority in comparable securities markets. CRS says banks can currently underwrite and deal in limited securities categories, including instruments issued by federal and state governments or their agencies.
CLARITY Act versions would give banks different permissions
Under the House-passed version, banks could use digital assets or blockchain technology to carry out activities already permitted by law, according to the CRS analysis. The House text would also authorize certain crypto activities for financial holding companies, allowing those services in nonbank subsidiaries rather than insured banking subsidiaries.
By comparison, the Senate-reported text would permit all types of banking organizations and credit unions to undertake its listed crypto activities, the report says. Its treatment would not separate activities belonging to the “business of banking” from those considered “financial in nature.”
In describing the proposal’s potential effect on Bitcoin, Sen. Cynthia Lummis has argued that the legislation would allow U.S. banks to buy and hold the asset directly. Lummis has also predicted that the resulting demand could push prices “dramatically” higher.
Her forecast concerns permissions that would require legislation to become law. On Sep. 15, the Senate rejected cloture on the motion to proceed with H.R. 3633 by 49 votes to 50, leaving the measure below the 60-vote threshold needed to open debate, according to subsequent reporting on the bill.
The procedural result did not constitute a final vote on the legislation itself. Seven Democratic senators who opposed advancing the measure later described the outcome as “not the end” and said they remained committed to negotiations, according to Sep. 22 coverage.
Banking groups challenged stablecoin rewards before the vote
Before the Senate’s procedural setback, eight banking associations asked lawmakers to revise provisions covering incentives paid to stablecoin holders.
As crypto.news reported on Sep. 14, the groups challenged stablecoin reward provisions, arguing that payments resembling deposit interest could encourage customers to withdraw funds from banks. The associations said lost deposits could reduce lenders’ ability to extend credit to households, farmers and businesses.
“Deposits are the foundation of the banking system,” the organizations said.
Their objections focused on Section 10404, according to the report. The associations requested changes to wording they believed could permit rewards calculated partly from a customer’s stablecoin balance, even when providers attached another condition to the payment.
A revised Republican proposal would give the Treasury secretary authority to restrict certain rewards if stablecoins caused substantial deposit outflows from community banks. The banking groups argued that lawmakers should prevent interest-like incentives through the statute rather than depend on intervention after deposits had already left.
Separately, 17 state attorneys general challenged provisions they said could weaken state securities enforcement and impede efforts to pursue crypto fraud. The coalition, led by New York Attorney General Letitia James, said added authority to enforce public officials’ conflict-of-interest restrictions did not resolve its concerns about securities registration.
Fed proposals would govern stablecoin reserves and applications
While market-structure legislation remains stalled, the Federal Reserve has continued implementing the already-enacted GENIUS Act, which established a federal framework for payment stablecoins.
In its Sep. 24 announcement, the Fed said its first proposal would require supervised issuers to fully back outstanding stablecoins with permitted assets, including short-term Treasury bills and certain other liquid holdings. The draft also covers capital requirements, risk management and firms that safeguard reserve assets.
The Fed’s second proposal would establish an application process for supervised banks seeking permission to issue payment stablecoins. Applicants would submit business plans, financial information and other documents, with procedures covering hearings, appeals and final decisions.
Earlier coverage of the Fed’s stablecoin rule proposals explained that insured state member banks would apply for approval to issue tokens through subsidiaries. Under the application draft, the bank would file with its appropriate Federal Reserve Bank rather than leave the proposed subsidiary to apply.
According to that Sep. 24 report, the Fed would notify applicants within 30 days whether their submissions were substantially complete. Once complete, an application would enter the GENIUS Act’s 120-day decision period.
Treasury has identified Jan. 18, 2027, as the expected effective date for the law’s main issuer restrictions, according to the report. The statute also allows an earlier start 120 days after responsible federal regulators issue final implementing rules.
Existing AML duties remain in force for crypto firms
For covered U.S. crypto businesses, the failed Senate vote has not removed customer identification, sanctions screening or suspicious activity reporting obligations, according to Prove’s global head of digital assets and sponsor banks, Fernando Castellanos.
In Sep. 22 coverage examining existing crypto AML obligations, Castellanos said the CLARITY Act principally addressed market structure and would not have replaced duties already imposed under the Bank Secrecy Act.
Castellanos said companies must continue checking beneficial ownership, monitoring transactions and filing reports when activity meets applicable reporting standards. He also said faster settlement and payments that are difficult to reverse give firms less time to detect suspected fraud or illicit transfers.
When evaluating crypto businesses, sponsor banks examine customer verification, wallet screening, sanctions controls, and transaction monitoring across the customer relationship, according to Castellanos. Banks also seek evidence that the controls operate effectively in practice, rather than relying only on written policies.
For credit unions considering stablecoin issuance, America’s Credit Unions identified a separate constraint in a Sep. 22 post: the treatment of reserves under credit union service organization investment limits. The association has asked the NCUA to clarify that reserves pledged by owner credit unions should not count against the applicable 1% aggregate investment cap.