Regulatory Roundup #18

Summary

The CLARITY Act cleared the Senate Banking Committee 15-9 on May 14. That sounds like progress until you remember it needs 60 votes on the Senate floor. In the EU, July 1 is arriving faster than some licensing teams would like: MiCA's CASP transitional periods expire then, and Poland's presidential signature remains outstanding. In the UK, the Bank of England has indicated it is willing to reopen the £20,000 holding cap and the 40% central bank reserve requirement for systemic stablecoins, while the FCA and the Bank have jointly launched a wholesale tokenization consultation with feedback due July 3. The SEC is preparing an innovation exemption for tokenized securities trading narrower than early industry proposals suggested. Singapore's MAS, meanwhile, has moved away from treating permissionless blockchain exposures as categorically higher-risk, with Group 1 treatment now on the table for banks that can make the case.

🔦 Spotlight

🇺🇸 The CLARITY Act’s harder test

Four months of stalled negotiation, one collapsed January markup, and a last-minute bipartisan deal on stablecoin yield brought the Digital Asset Market Clarity (CLARITY) Act to the Senate Banking Committee's table on May 14. The result was a 15-9 vote in favor, with all 13 Republicans joined by Democratic senators Gallego and Alsobrooks, and the bill's clearest demonstration of legislative momentum since the House passed a companion version 294-134 last July. 

The next steps are likely to be as hard-fought as the committee stage. The CLARITY Act needs 60 votes to overcome a filibuster in a full Senate vote. That means all 53 Republicans plus seven Democrats. The committee produced two.

What the markup settled, and what it did not

The markup addressed a contested DeFi provision that had been among the more contentious outstanding questions. Lummis Amendment 122, a technical package negotiated with Senator Warner, introduced conditions under which a DeFi protocol counts as sufficiently decentralized to fall outside the bill's intermediary obligations. The amendment passed 18-6, with Senators Warner, Cortez Masto, and Alsobrooks joining Republicans. Senator Warren's competing amendment, which would have authorized the Treasury to sanction DeFi services in the manner previously applied to Tornado Cash, failed 11-13.

Nonetheless, there remain outstanding questions. Ethics provisions, specifically restrictions on senior government officials and members of Congress holding or profiting from digital assets while in office, were not resolved in committee and remain a real issue ahead of a floor vote. Both Gallego and Alsobrooks voted yes in committee and immediately said so publicly; neither has committed to a floor vote. Gallego said that negotiators have "come close, but not finished, an agreement on ethics guardrails for elected officials" and added that if the issue is unresolved by the floor vote, he is not afraid to vote no. Alsobrooks said the same in substance. The committee's two Democratic votes are, for floor purposes therefore, contingent.

Why ethics has become the Democratic fulcrum

The ethics provisions reflect a specific political dynamic: Democrats have spent months pointing to the Trump family's involvement in crypto ventures, including World Liberty Financial and the launch of TRUMP and MELANIA meme coins, as evidence that comprehensive market structure legislation creates conflicts of interest for the officials who sign it into law. Several Democratic senators have argued that a bill deregulating digital asset markets while sitting officials and their families hold those assets is fundamentally compromised as a policy matter, regardless of its technical merits. The draft ethics language circulating in negotiations would restrict active financial interests in digital assets for the President, Vice President, Cabinet members, members of Congress, and their immediate families. Getting Republican senators to accept restrictions that apply to the sitting Republican president is not a simple ask. That dynamic explains why the provision was kept off the committee markup text entirely. Introducing it there would have killed Republican votes; its resolution on the floor is the single most uncertain variable in the 60-vote count.

The Agriculture merge

Before the bill reaches the Senate floor, it needs to be merged with the Senate Agriculture Committee's Digital Commodity Intermediaries Act (DCIA), passed on a party-line vote in late January. The DCIA addresses the CFTC's spot market registration framework for digital commodity intermediaries (exchanges, brokers, custodians), building on the jurisdictional split the CLARITY Act establishes between SEC and CFTC authority. The two bills are designed to be complementary, but they use different definitional approaches and contain overlapping provisions that need to be reconciled before a floor manager can introduce a unified text. That reconciliation is, in effect, a second and quieter markup, conducted between committee staffs rather than on the record.

The merged Senate bill then needs to be reconciled with the House-passed version, which carries its own provisions on CFTC jurisdiction and DeFi treatment. That is a third negotiation layer, though the House bill's 294-134 margin gives the conference process considerably more headroom than the Senate floor dynamics currently allow.

The 60-vote problem

The five additional Democratic votes needed beyond Gallego and Alsobrooks will come (if they come), from senators who have each engaged with crypto policy on different terms: Gillibrand, who has historically been among the more crypto-receptive Senate Democrats; Warner, whose DeFi definition concern was partially addressed in the markup but who has broader conditions; Booker and Coons, who have focused on consumer protection; and Warnock, who has raised financial inclusion concerns. There is no obvious path to seven Democratic floor votes without resolving it in a way that satisfies the party's consumer-protection and anti-corruption wing, not just its crypto-engaged minority.

The calendar

The White House has positioned July 4 as a signing target. Patrick Witt, the administration's crypto policy lead, called a viable path achievable. That is not impossible, but it requires the Agriculture merge to close within the next few weeks, a floor debate in June that holds together under amendment pressure, and 60 senators voting yes before the August recess removes the working window. Miss August, and the bill competes with midterm politics in September and October, the scenario Senator Moreno warned about before the markup. The more conservative baseline is a floor vote in late June or July, with July 4 as an aspirational marker rather than a fixed date.

What failure would mean

The 2026 legislative window is better described as a legislative letterbox at this point. Comprehensive crypto market structure legislation has been attempted in the 117th, 118th, and now 119th Congress. Each iteration has produced more refined text, broader bipartisan engagement, and a higher House vote margin, but no actual law. If the CLARITY Act stalls in 2026, the next Congress takes office in January 2027 with a midterm election reshaping the Senate's composition, a new committee seniority structure, and no guarantee that the current administration's political capital on crypto carries into a second midterm year. Galaxy Digital's Alex Thorn put the odds of enactment in 2026 at roughly 50-50 in April; after the committee vote he revised that to 75%, with a potential Trump signature by early August if the floor schedule holds. The ethics question will play a large part in determining whether that timeline is achievable.

🌎 Global Developments

🇺🇸 United States

🔬 SEC prepares innovation exemption for tokenized securities trading

The SEC is preparing to release its innovation exemption for tokenized stocks, reportedly as soon as this week. Bloomberg reports that the framework would create a new pathway for trading digital versions of publicly traded securities. Chair Atkins has publicly described the proposal as a "cabined framework" for facilitating on-chain trading of tokenized securities in a compliant fashion while the Commission works toward longer-term rules.

At its March 12 meeting, the SEC's Investor Advisory Committee approved a recommendation urging the Commission not to adopt a blanket exemption, but to use either narrow exemptive relief or rule-by-rule reform, subject to notice and comment. The IAC's principles focused on mandatory disclosures about ownership rights, SEC/state/FINRA oversight of intermediaries, and protections seeking the best terms for investors' orders. Commissioner Peirce said separately that staff were developing a narrower exemption for limited trading of certain tokenized securities, not the broader blanket carve-out some market participants had sought.

The likely guardrails are still not public but SEC remarks support a temporary framework with trading-volume limits and a whitelisting process for buyers and sellers, with relief from some rules or requirements that may not fit the technology. This is, however, not a wholesale waiver of broker-dealer, exchange, or clearing-agency obligations.

The January 2026 SEC staff statement remains the clearest public staff view: tokenizing a security does not change its legal character. A tokenized stock is still an equity security, and federal securities law applies based on the instrument's substance rather than the recordkeeping technology. The exemption is an entry path for qualifying activity, not a reclassification of the instrument.

🇬🇧 United Kingdom

🏦 Bank of England revisits systemic stablecoin limits

The Bank of England's proposed regime for systemic stablecoins, which would have capped individual holdings at £20,000 and required 40% of backing assets to sit at the Bank, is being reconsidered. Deputy Governor Sarah Breeden confirmed in a speech earlier this month that the Bank is revisiting the calibration of transitional holding limits and is open to alternatives, including aggregate issuance guardrails. Press reporting also suggests the 40% Bank-account requirement is under review, with the Bank now open to a tiered or risk-sensitive approach rather than a hard quantitative ceiling.

The 2025 consultation, building on the Bank's 2023 discussion paper, proposed temporary individual holding limits of £20,000 and a backing-assets model requiring 40% of reserves to be held at the Bank. Both were designed to address financial stability risks from rapid stablecoin growth at systemic scale, specifically the risk of a run dynamic that could drain retail deposits from commercial banks into a BoE-backed settlement asset. Critics argued that a £20k individual cap would make sterling systemic stablecoins commercially unviable before they had a chance to develop, and that the 40% deposit requirement would impose a cost of carry with no equivalent in the EU or US frameworks.

Despite Breeden's remarks, we are yet to see a formal policy revision. HM Treasury's digital assets legislation remains the controlling framework, and the BoE's stablecoin supervisory powers derive from there. What the speech indicates is that the Bank is willing to engage on calibration rather than defend the original numbers as a baseline.

Further BoE policy material is expected later this year, and the calibration remains a work in progress. The window for shaping the quantitative parameters has not closed.

🏗️ FCA and Bank of England set out joint tokenization roadmap for wholesale markets

The FCA and the Bank of England published a joint Call for Input on May 18, setting out a shared vision for tokenization in UK wholesale markets and asking firms to identify where existing rules and infrastructure support or constrain adoption. Feedback closes July 3.

The publication comes alongside several substantive items. The PRA has issued Dear CEO letters on the prudential treatment of tokenized asset exposures and stablecoins, and on innovations in deposits, e-money, and stablecoins. These reflect current supervisory expectations. The Bank is consulting on extended RTGS and CHAPS settlement hours toward near-24/7 settlement, including weekends, and has committed separately to launching a live synchronization service by 2028 and accepting tokenized equivalents of already eligible assets as collateral at central counterparties and in its own central bank operations. HM Treasury's digital gilt instrument (DIGIT) pilot sits in the same cluster.

One persistent source of uncertainty for wholesale tokenization has been which regulator holds authority over what: the FCA owns market conduct, the Bank holds settlement infrastructure and financial stability, the PRA holds prudential standards. The Call for Input signals that all three are aligned, which removes one reason to wait. For custody operations, the FCA's commitment to reviewing CASS rules in light of industry feedback is the most immediately actionable item. How client asset rules apply to tokenized holdings is unsettled, and this consultation is the channel for firms to flag where current rules don't fit.

Sixteen firms are already in the Digital Securities Sandbox working on live issuance and settlement. The July 3 deadline gives those firms, and any institution with wholesale tokenization plans, a chance to shape the regulatory architecture before it is set. Breeden's framing at the launch, 'moving from pilots to production,' is backed by the infrastructure commitments. The 2028 sync service target gives institutions something specific to plan around.

🇪🇺 European Union

🗓️ MiCA's July 1 deadline and Polish veto risk redux

July 1 marks the EU-wide expiry of MiCA's CASP transitional periods. After that date, any CASP operating without a MiCA license is in breach and should cease providing crypto-asset services. ESMA has published the complete suite of Level 2 technical standards, so the regulatory architecture is in place.

Poland remains the live variable. The Sejm passed a MiCA transposition bill on May 15 by 241 votes to 200, on its third attempt after two earlier failures. The bill now passes to the Senate and then to President Karol Nawrocki, whose earlier refusal to sign crypto-assets legislation keeps the presidential-signature stage a live implementation risk. A presidential veto, though procedurally surmountable, would delay formal transposition past July 1. However, an overriding vote would require a three-fifths majority in the Sejm, which is far from a given.  Poland is not among the largest crypto markets in the EU, but a gap in transposition creates passporting complications for CASPs operating cross-border into Polish retail customers.

More broadly, the July 1 cliff is generating a familiar compliance dynamic: a significant number of firms operating in the EU under transitional arrangements are still struggling with licensing applications to their home-state NCAs. ESMA has published supervisory guidance noting uneven application quality across member states, with several NCAs reporting incomplete documentation. Firms that miss the July 1 window face the prospect of suspended EU operations until licensing is complete.

The stablecoin-specific provisions (Title III for asset-referenced tokens, Title IV for e-money tokens) have been in effect since June 2024. July 1 closes the remaining transitional gap for CASP services.

🌏 Asia-Pacific

🇸🇬 Singapore

🏦 MAS proposes more risk-sensitive capital framework for permissionless assets

MAS's April 2026 consultation on cryptoasset prudential treatment moves away from the blanket conservative approach that had applied to assets on permissionless blockchains. Under the proposal, permissionless cryptoassets may qualify for Group 1 treatment where a bank can demonstrate that technology and governance risks are adequately mitigated. It is a meaningful departure: the previous position treated permissionless exposure as categorically higher-risk regardless of the specific asset or mitigation measures in place.

The proposal introduces exposure and issuance caps for locally incorporated banks. Current summaries point to a 2% of Tier 1 capital exposure cap and a 5% of Tier 1 capital issuance cap, though the final calibration will follow the consultation response. The caps function as ceilings on how much of a bank's capital base can be deployed into these exposures, not as substitutes for the underlying BCBS risk-weight treatment.

For institutions using Singapore banking entities as their primary digital asset booking vehicles, the direction of travel matters as much as the specific numbers. A framework that allows Group 1 treatment for permissionless assets on a risk-mitigated basis opens more room than the previous default. The consultation closed May 18; MAS's response document and final rules are pending.

🇰🇷 South Korea

📋 Staged institutional access rather than a settled regime

South Korea is moving toward greater institutional participation in crypto markets, but through staged FSC implementation rather than a single enacted framework. The FSC's 2025 roadmap permits corporate virtual asset transactions in phases, beginning with limited liquidation and operational use cases and expanding to selected corporates and professional investors. Financial companies remain excluded from the current pilot phase. Stablecoin and broader digital asset legislation remains in development, and the Virtual Asset User Protection Act (already in force) is the operative supervisory framework.

The snap presidential election of June 2025, triggered by President Yoon Suk-yeol's removal following the December 2024 martial law episode, resolved with Lee Jae-myung's election. The relevant sequencing uncertainty now is the Lee administration's legislative and FSC implementation timetable, not the election itself. Secondary legislation and FSC implementing rules will determine when the staged access roadmap advances to its next phase.

Institutions monitoring South Korea should track FSC announcements on the corporate pilot expansion and any legislative movement on stablecoin rules, rather than treating DAFA as a passed and implemented statute.

🌏 Africa

🇰🇪 Kenya

📑 Draft VASP regulations published for consultation

Kenya's National Treasury published draft Virtual Asset Service Provider Regulations 2026 for public consultation in March, with the comment period closing April 10. The framework sits across both the Central Bank of Kenya and the Capital Markets Authority: CBK takes supervisory responsibility for payment-focused VASPs and stablecoin-related activities; CMA covers VASPs whose services relate to crypto assets that function as investment instruments. An exchange offering both payment rails and trading products would fall under both regulators, and the draft regulations include coordination provisions, though the interagency mechanics under stress conditions are not yet fully specified.

Licensing requirements include minimum capital thresholds, AML/CFT compliance aligned with FATF standards, cybersecurity baseline requirements, and consumer protection disclosures. The Kenyan framework, if enacted materially in its consulted form, would be among the more complete VASP regimes on the continent.

Final regulations have not yet been published; the consultation closed six weeks ago and a response document is pending.

👀 Things to Watch

• 🇺🇸 CLARITY Act: cleared Senate Banking Committee 15-9 on May 14. Floor vote requires 60 votes; White House targeting July 4. August recess is the risk horizon if the vote slips.
• 🇺🇸 GENIUS Act AML/CFT NPRM: comment deadline June 9. SAR scope, sanctions screening standard, and the primary/secondary market distinction are the provisions most likely to be shaped by practitioner letters.
• 🇺🇸 SEC Reg Crypto: OIRA review underway; publication awaited.
• 🇬🇧 FCA CP26/13: consultation closes 3 June 2026. Final perimeter guidance due by September, ahead of the authorization gateway opening 30 September.
• 🇦🇺 ASIC INFO 225 no-action harbor expires June 2026. Platforms relying on INFO 225 relief that have not begun assessing their AFSL licensing pathway are running out of time.
• 🇪🇺 MiCA: transitional periods expire 1 July 2026 EU-wide. Any CASP without a license after that date is in breach of EU law.
• 🇵🇱 Poland: MiCA transposition bill passed the Sejm 241-200 on May 15. Presidential signature still required ahead of the July 1 deadline.
• 🇺🇸 California DFAL: application deadline for operating firms 1 July 2026.
• 🇯🇵 Japan FIEA bill: Diet consideration continues following Cabinet approval on April 10. Current ordinary Diet session runs to mid-July.

Coming into view:

• 🇺🇸 DTCC tokenization service: limited production trades July 2026, full launch October 2026.
• 🇬🇧 FCA: policy statements on substantive crypto rules due summer 2026, ahead of the October 2027 regime go-live.
• 🇪🇺 EU Market Integration and Supervision Package: multi-month legislative negotiations continuing.
• 🇰🇷 South Korea: FSC corporate virtual asset pilot expansion and stablecoin legislation remain in development under the Lee administration.
• 🇸🇬 MAS: prudential consultation on permissionless blockchain exposures closed May 18; response document pending.

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