French Hill argues CLARITY Act can plug regulatory gaps left by GENIUS Act
French Hill, chair of the U.S. House Financial Services Committee, believes Congress already has the tools it needs to close some of the most contentious gaps in emerging crypto legislation. According to him, the CLARITY Act, which the House passed with bipartisan support, could resolve several unresolved questions surrounding the GENIUS Act and the broader regulatory framework for stablecoins and digital assets.
In a recent interview, Hill explained that while the GENIUS Act is designed to create a comprehensive structure for stablecoin issuers, it does not fully answer every technical or policy concern. That, he said, is where the CLARITY Act is meant to step in-by addressing issues that sit at the intersection of securities, commodities, and banking law as they relate to digital assets.
Hill emphasized that the CLARITY Act is not a theoretical proposal. It has already cleared a key hurdle in the House of Representatives with rare cross-party backing. “Last summer in the House, we drafted and passed the CLARITY Act,” he noted, adding that it received support from 78 Democrats. That bipartisan margin, he argued, shows that lawmakers across the aisle recognize the need for a coherent framework rather than a patchwork of enforcement actions and agency guidance.
Both the GENIUS Act and the CLARITY Act are part of a broader effort in Washington to answer a basic but critical question: how should stablecoins and other digital assets function within the existing U.S. financial system? Policymakers are wrestling not only with definitions-what is a security, what is a payment instrument-but also with broader questions of systemic risk, consumer protection, and fair competition between traditional banks and new crypto-native firms.
One area where Hill says lawmakers have already reached rare consensus concerns the treatment of stablecoins that resemble deposit-like products. According to him, there is bipartisan agreement that stablecoins themselves should not pay yield directly to holders. “On a bipartisan basis we said stablecoin should not pay yield,” he stated. That principle has become central to debates around the GENIUS Act, which focuses on the regulatory regime for stablecoin issuers and the nature of the products they can offer.
Yield is at the heart of the discussion because it blurs the line between a simple payment token and a savings or investment product. If a stablecoin resembles a bank deposit or a money market fund in practice, policymakers worry that it could introduce bank-like risks-such as runs or liquidity crunches-without being subject to bank-like capital, liquidity, and supervisory standards. This is one of the reasons Hill believes certain yield-related questions are better addressed through targeted legislation and precise rulemaking, rather than through broad, loosely defined statutory language.
Hill suggested that some of the residual concerns surrounding the GENIUS Act can be handled through the CLARITY Act, which focuses more specifically on regulatory definitions and boundaries in the digital asset space. “In my view, this independent issue can be resolved in the CLARITY Act,” he said, referring to questions that the GENIUS Act either leaves open or only partially resolves. The idea is to use the CLARITY Act to refine how regulators interpret and apply existing financial laws to new technologies and business models.
At the same time, Hill acknowledged that not every policy question requires a brand-new statute. He argued that some matters-especially those dealing with rewards, incentives, or promotional schemes tied to stablecoin usage-are better suited to the regulatory process. “I think all the issues about paying rewards should be dealt with in the regulatory proposal that Treasury has to come up with,” he explained. That would allow technical details to be hammered out through notice-and-comment rulemaking, where regulators can gather industry feedback, analyze data, and adjust proposals before they become final.
Even so, Hill added that the GENIUS Act remains the core legislative vehicle for stablecoin oversight. “I think that’s best resolved in the GENIUS Act,” he said in reference to the broader structure governing who can issue stablecoins, how they must hold reserves, and what kind of disclosure and risk-management obligations they must meet. In his view, the two bills are complementary: the GENIUS Act sets out the architecture, while the CLARITY Act fine-tunes how that architecture fits into the existing regulatory edifice.
Traditional financial institutions have watched these developments closely, often with unease. Major banks have argued that crypto companies may enjoy a regulatory advantage if they can operate under lighter or more flexible rules. Bank executives insist that if stablecoins are allowed to function as dollar-substitutes or near-deposit instruments, their issuers should be held to comparable standards of safety, soundness, and consumer protection. Otherwise, they warn, the system risks creating a two-tier regulatory regime.
Hill has repeatedly framed “parity” as a guiding principle of the legislative effort. “We want equal treatment between bank and nonbank issuers of stablecoins,” he said. The aim, he explained, is not to favor one model over another, but to ensure that similar activities are supervised under similar levels of scrutiny, regardless of whether they are conducted by a chartered bank, a fintech company, or a crypto-native platform.
That stance has attracted attention from high-profile banking leaders, including executives at some of the country’s largest financial institutions. They have questioned whether current drafts of the legislation might give digital asset issuers too much leeway in how they structure products or manage reserves. Some have warned that if oversight is too soft, stablecoin issuers could undercut banks on costs while offloading more risk onto consumers and the broader financial system.
Hill insists lawmakers are aware of these concerns and are trying to avoid a lopsided outcome. “All issuers should be treated the same way,” he said. The objective is to prevent a situation in which one segment of the market-such as platforms using dollar-backed stablecoins-operates under a lighter framework that effectively encourages regulatory arbitrage. “You don’t want to have an imbalance between people using a dollar-backed stablecoin on their platform,” he remarked, underscoring the risk that capital might simply migrate to the least-regulated corner of the ecosystem.
Beyond the immediate tug-of-war between banks and crypto firms, the CLARITY and GENIUS Acts reflect a deeper shift in how Washington views digital assets. For years, regulators largely relied on enforcement actions and existing statutes drafted long before blockchains existed. That approach left companies and investors uncertain about what was allowed, what might trigger enforcement, and how new financial instruments would be classified. By codifying clearer rules for stablecoins and related products, Congress is attempting to reduce that ambiguity.
The stablecoin debate is especially significant because these tokens are increasingly seen as bridge assets between traditional finance and the crypto economy. They are used for remittances, trading, payments, and, in some cases, as a dollar proxy in regions with unstable currencies. A clear, consistent framework could help attract institutional players, foster innovation in payment systems, and reduce legal and compliance risk for firms that want to experiment with on-chain financial services.
However, the balance is delicate. If lawmakers and regulators move too aggressively, they could push innovation offshore or into less regulated environments. If they move too slowly or leniently, they risk a buildup of hidden leverage and systemic vulnerabilities. The CLARITY Act’s role, as Hill envisions it, is to provide a more predictable foundation by clarifying how existing securities and commodities law interacts with digital assets, while leaving room for tailored oversight of genuinely new risks.
One of the key open questions is how far “equal treatment” between bank and nonbank issuers should go in practice. Banks are subject to capital requirements, regular stress testing, on-site examinations, and intricate liquidity rules. Nonbank stablecoin issuers, even under a stricter regime, are unlikely to face an identical set of obligations. Hill’s framing suggests that parity may focus less on identical supervision and more on comparable outcomes: robust reserves, transparent disclosures, and credible protections for users in the event of stress.
Another tension lies in the treatment of ancillary services around stablecoins-such as rewards programs, loyalty incentives, and yield-bearing wrappers. Hill’s view that these issues should be largely addressed through Treasury-led rulemaking underscores the complexity of regulating not just the core token, but the ecosystem of financial engineering built on top of it. Regulators will need to distinguish between marketing incentives, credit-like products, and true investment offerings, each of which may fall under different legal regimes.
Looking ahead, Hill’s comments suggest that the legislative process will likely remain iterative. The GENIUS Act may establish the backbone for stablecoin oversight, while the CLARITY Act refines critical definitions and bridges gaps with preexisting law. Subsequent regulatory proposals from Treasury and other agencies would then fill in technical details, from reserve composition and disclosure templates to standards for third-party custodians and auditors.
For market participants, the message is twofold: the era of regulatory ambiguity is slowly giving way to more formal structures, and the playing field between banks and crypto-native firms is likely to level out rather than tilt decisively one way or the other. Hill’s push to use the CLARITY Act as a gap-filler for the GENIUS Act underlines a broader strategy in Congress-build a layered framework in which statutes, rules, and supervisory guidance work together, instead of relying on case-by-case enforcement to define the contours of the law.
In that sense, the debate over the CLARITY and GENIUS Acts is not just about crypto. It is a test case for how the U.S. will handle financial innovation that does not fit neatly into 20th-century regulatory categories. Whether lawmakers can deliver on Hill’s promise of equal treatment and clear rules will shape not only the future of stablecoins, but also the broader trajectory of digital finance in the United States.