BPInsights: August 1, 2026

Clarity Act Negotiations Continue as Senate Nears August Recess

With one week remaining before August recess, the path forward for Clarity remains unclear.

A motion to proceed has not yet been filed, and the Senate already has multiple items on the table next week, including a Russia sanctions bill, a package of nominations and potential activity on a continuing resolution that would fund the government through the end of the year.

In addition to the narrow timing window, Senators on both sides of the aisle have continued to raise questions about the bill.

Senators John Cornyn (R-TX), John Curtis (R-UT), Mike Rounds (R-SD) and James Lankford (R-OK) have reportedly raised questions about how the current yield provision could drive deposit flight and reduce community lending.

Following concerns from law enforcement groups that the current language would hamper their ability to stop and prosecute illicit finance, Senator Catherine Cortez Masto (D-NV) reportedly shared a proposed fix with the White House, which was supported by the National Association of Assistant U.S. Attorneys and the National District Attorneys Association, but the language was rejected by the administration.

In an effort to overcome concerns about government officials' involvement in cryptocurrencies, Senators Ruben Gallego (D-AZ) and Thom Tillis (R-NC) reportedly shared new ethics language with the White House. The White House has not yet responded to the proposal.

The National Sheriffs' Association also sent a letter Friday to Senate leaders, expressing concern that the bill would "create broad exemptions from registration, know-your-customer, anti-money-laundering, and sanctions-law requirements for certain decentralized-finance participants, potentially allowing illicit actors to exploit platforms and services designed to obscure digital-asset transactions."

Five Key Things

1. Fed Payment Accounts Need Strong Guardrails to Protect Financial System

The Federal Reserve must require strong safeguards for newly proposed payment accounts to protect the U.S. financial system, the Bank Policy Institute, Financial Services Forum and The Clearing House Association said in a comment letter on Monday. The accounts, proposed by the Fed in May, would give unprecedented direct access to Federal Reserve payment rails to firms without the full range of bank protections, including deposit insurance and BSA/AML supervision by a federal banking agency. To keep the system safe, the Fed should apply rigorous standards to every firm seeking access to its payment rails, the trades emphasized.

"The question of who can access the federal payment rails is critically important. Giving such access to firms without deposit insurance, supervision by a federal banking regulator for AML/CFT obligations or other banking protections could expose the financial system to significant risk. The Federal Reserve should therefore proceed cautiously when considering whether such firms should have access to any type of Reserve Bank account, including a payment account." - BPI, FSF and The Clearing House Association

Background. The Federal Reserve opened the rulemaking process in December 2025 with a request for information on payment accounts, followed in May 2026 by a proposed framework for such accounts. The Fed proposed various restrictions on such accounts, which would be available to "eligible institutions," some of which may lack deposit insurance, consolidated holding-company supervision or other features of fully regulated banks. This effort comes amid several years of policy and legal debate about which institutions should be allowed to have direct access to a master account.

To read the policy recommendations in the letter, click here.

2. OCC and FDIC Propose New Community Reinvestment Act Framework

The OCC and FDIC proposed a rewrite of Community Reinvestment Act regulations on Friday, seeking to increase the emphasis on lending activity, reduce compliance requirements for many smaller banks and revise standards for community development activities. The proposal would raise key asset thresholds, exempting banks with $10 billion or less in assets from certain reporting requirements, and would introduce new restrictions on community development grants that qualify for CRA consideration, including limits on administrative and overhead expenses. Comments on the proposed rule will be due 60 days after the date of publication in the Federal Register.

Background. The proposal comes amid ongoing litigation regarding the federal banking agencies' 2023 revised CRA rule. That rule was challenged by several associations, including the Texas Bankers Association, ABA, Chamber, and ICBA. The U.S. District Court for the Northern District of Texas in 2024 issued a preliminary injunction against the agencies with respect to the 2023 rule. The agencies appealed the preliminary injunction to the Fifth Circuit, but later requested a stay of the appeal to allow the agencies to propose and finalize a rescission of the 2023 rule and revert to the agencies' 1995 CRA rules. The OCC and FDIC filed a motion on July 1, 2026, to withdraw from the appeal, which the Fifth Circuit granted on July 9th.

The OCC and FDIC today filed a motion in the District Court for the entry of a final judgment against them regarding the 2023 rule. The Federal Reserve did not join the OCC and FDIC on either the proposed rule or the motion filed today. The Federal Reserve has indicated in court filings that it intends to proceed with finalizing the proposal to rescind the 2023 rule and revert to its 1995 CRA rule.

3. Paridon: Master Accounts Must Come with Regulatory Obligations to Mitigate Risks

BPI Co-Head of Regulatory Affairs Paige Pidano Paridon participated Wednesday in a panel discussion hosted by the Federalist Society on the Clarity Act and Federal Reserve master accounts. Other panelists included Alex Pollock of the Mises Institute, Corey Then of Circle and Wharton professor David Zaring, with King & Spalding's J.C. Boggs moderating. Sen. Cynthia Lummis (R-WY) gave opening remarks. Here are some highlights.

• Risk Evaluation. One question asked how a bank's engagement in digital assets should be considered in risk assessments for master accounts, and whether such activities matter if a bank satisfies all the applicable banking laws and supervisory requirements. "Under the Fed's guidelines that they have issued, the Federal Reserve evaluates the risks that the applicant presents across a variety of dimensions and determines whether the entity is able to manage those risks," Paridon said. "So whether those risks be as a result of engaging in digital asset activities or traditional activities, I don't think that analysis should change the results."
• 'Club Rules.' Moderator J.C. Boggs described the master account guidelines as the "club rules" and suggested that the Fed's determination of master account access "seems to be discretionary" rather than automatic. Alex Pollock gave examples of changes to the relevant statute that opened account access to "very much outsiders and not members of the club."
• Activities-Based Regulation. Corey Then and Paige Paridon both expressed support for "activities-based and tech-neutral" regulation. Corey Then said, "I actually agree with Paige that regulation should be activities-based and tech-neutral … And contrary to popular belief, I think the banks and crypto companies actually have a lot of communication and a lot in common, and we can work together to benefit the greater financial system." Paridon said, "Banks have welcomed innovation, competition. Banks have worked with fintechs and other firms on a variety of products and services to provide their customers what they want."
• Bottom Line: Benefits and Costs. "In our statutory framework that regulates the financial system, there are certain benefits that are provided at the cost of various regulations and obligations, and I think ultimately the obligations to those who receive those benefits need to be equivalent, and that underlies our input on the Fed payment accounts, as well as the changes we would like to see in Clarity, as well as [when] we see the agencies implement GENIUS over the coming months."

4. The Crypto Ledger

Here's the latest in crypto.

• Binance.US Plans Prediction Markets Push. Binance.US, a separate entity from the crypto exchange Binance Holdings Ltd., plans to apply for a license with the Commodity Futures Trading Commission that would help it start its own prediction market. The firm plans to apply for a designated contract market license next month, according to comments this week by CEO Steven Gregory.
• Bitcoin Extends Recent Decline. Bitcoin fell below $63,000 on Friday, its lowest level in roughly two weeks. The cryptocurrency was down as much as 3.6% during the session, while other digital assets also moved lower as investors are pulling back from higher-risk trades.

5. BPI, Banking Groups Call for Coordination in Stablecoin Rulemakings

In order to safeguard the financial system, federal regulators should ensure that their stablecoin rules issued under the GENIUS Act are coordinated and aligned, said BPI, the American Bankers Association, Consumer Bankers Association and Independent Community Bankers of America. In a comment letter this week, the organizations highlighted the risk "that payment stablecoin issuers are vulnerable to runs, rapid redemption of payment stablecoins can cause contagion, the growth of payment stablecoins could cause credit to contract, and stablecoin lending presents risks for the broader financial system." The requirements emerging from separate GENIUS Act rulemakings by the Fed, FDIC, OCC and other agencies should be identical "to guard against the risks that are presented by payment stablecoins and prevent regulatory arbitrage," the letter said.

In Case You Missed It

AI Analysis: Are Central Bank Financial Stability Reports Useful?

Major global central banks publish regular financial stability reports to inform policy and shape bank examination. But do those reports effectively anticipate new emerging financial stability risks? A new BPI analysis based on an artificial intelligence review of reports from the Federal Reserve, European Central Bank and Bank of England evaluates their risk projection ability. The results show that the financial stability reports produce zero or negative alpha - that is, they consistently fail to identify subsequent financial stability problems that are not already recognized by the market. Read more here.

Traversing the Pond

Here's the latest in international banking policy.

• BoE Probes Investment Bank Exposure to Asian Equities. The Bank of England's Prudential Regulation Authority launched a review of UK prime brokerages' concentration in Asian equities, according to the Financial Times. The PRA is concerned about a buildup of highly concentrated bets on AI-linked companies in Asia.
• Comporti Appointed to Lead EU Markets Regulator. Italian regulator Carlo Comporti was selected by European member states to lead the European Securities and Markets Authority, the bloc's markets regulator. Comporti, a commissioner at Italy's markets regulator, joined the executive board of ESMA in 2024.

Federal Reserve Proposes Regulation O Modernization

The Federal Reserve on Friday requested comment on a proposal to modernize its rule governing the extension of credit to bank "insiders"-bank executives, board members and major shareholders who could potentially influence a bank's lending decisions.

Regulation O has not been comprehensively updated since 1979, and among other reforms, it updates outdated thresholds and indexes them to economic growth going forward, while maintaining safeguards against preferential treatment.

BPI issued a statement regarding the proposal.

Upstart Obtains Conditional Approval for National Bank Charter

Online lender Upstart received conditional approval from the OCC for its application for a national bank charter. Upstart Bank NA would be a full-service, Delaware-based bank that accepts deposits and originates loans nationwide. The company describes it as the first national bank built with artificial intelligence-based underwriting. The firm is awaiting the Federal Deposit Insurance Corp.'s approval for deposit insurance, the Federal Reserve's approval for bank holding company status and a final approval from the OCC.

Member News

BNY Launches New Blockchain Recordkeeping Feature

BNY this week announced the launch of its Digital Transfer Agency capabilities, which support digital and traditional asset funds across multiple jurisdictions and blockchains. "For BNY, whose transfer agent services roughly $8.6tn in assets across 7.6mn accounts, establishing market architecture on the blockchain provides a single universal record for share ownership and other functions without the need for multiple intermediaries," the Financial Times reported. Read more here.

Upcoming Events

• 8/6/2026: Senate Banking Committee Hearing: Empowering Main Street by Unlocking Access to Capital
• 9/15/2026-9/16/2026: FOMC Meeting