Senate Banking Sets Jan 16 for CLARITY Act Markup; DeFi Tokens Slide on “Surveillance” Fears
Senate Banking Committee confirms markup date for market structure bill; industry fears “poison pill” DeFi amendments could derail post-GENIUS Act momentum.
The Senate Banking Committee has scheduled the markup for the Digital Asset Market Clarity Act (CLARITY Act) for Thursday, January 16, Senator John Kennedy confirmed in a statement Friday. The announcement sets a hard deadline for what has become a legislative gauntlet, with industry insiders warning that last-minute Democratic amendments regarding decentralized finance (DeFi) could force the crypto lobby to withdraw support.
Markets reacted swiftly to the reintroduced regulatory risk. Uniswap (UNI) slid 4.2% to $9.12 and Aave (AAVE) dropped 3.8% as traders digested reports that the markup will include controversial “front-end sanctions” compliance requirements.
The “Missing Layer”
While the GENIUS Act, signed into law last July, settled the stablecoin payment rails, the CLARITY Act (H.R. 3633) addresses the broader market structure. It passed the House in a decisive 294-134 bipartisan vote in July 2025, aiming to delineate jurisdiction between the SEC and CFTC.
However, the Senate version has stalled over three “poison pill” issues revealed in committee summaries:
- DeFi Surveillance: Provisions requiring non-custodial interfaces to screen users for sanctions compliance, effectively banning permissionless front-ends.
- Yield Restrictions: New language potentially capping yield on stablecoins, conflicting with the recently enacted GENIUS framework.
- Agency Quorums: Disputes over staffing requirements for the CFTC’s new digital commodity division.
"A bipartisan meeting on Jan. 6 laid bare a stark divide… Democrats have introduced robust demands to bring the DeFi sector under traditional financial surveillance," noted Alex Thorn, Head of Research at Galaxy Digital.
Institutional Context: The “Make or Break” Window
The January 16 markup is viewed as the final exit ramp before the 2026 midterm election cycle freezes legislative capital. Analysts at TD Cowen peg the odds of passage at 50-60%, but only if the DeFi language is softened.
For institutional players, the stakes are existential. While banks have reportedly lobbied against the bill to protect settlement monopolies, crypto-native firms argue the current "regulation by enforcement" regime, which the CLARITY Act seeks to end, remains the greater threat. If the committee fails to report the bill next Thursday, the legislation is effectively dead for the 119th Congress.
