May proved to be a defining month for crypto market structure legislation in the United States. After months of legislative gridlock and back-and-forth between crypto firms, banks, and the White House, the Senate Banking Committee finally advanced the CLARITY Act with bipartisan support. This breakthrough was paired with continued institutional engagement, headlined by Circle's $222 million Arc blockchain raise involving Wall Street heavyweights, and a notable shift around Hyperliquid as institutional pressure on US regulators intensified. Meanwhile, exploits continued to plague the ecosystem with familiar single-point-of-failure patterns.
The CLARITY Act, which has been stalled for months over differences regarding stablecoin yield and ethics provisions, finally advanced through a critical stage this month. Early in May, the long-awaited stablecoin yield compromise text has been finalised. Section 404 of the bill bars crypto firms from paying any interest or yield “economically or functionally equivalent” to a bank deposit, while preserving activity-based rewards tied to platform usage. Coinbase CEO Brian Armstrong, who used to be a strong opponent and previously walked away from the bill, urged the Senate Banking Committee to mark it up shortly after the compromise was reached.
Ultimately, the Senate Banking Committee voted 15-9 to advance its version of the Clarity Act, with support from Democratic Senators Ruben Gallego and Angela Alsobrooks. Interestingly, Senator Gallego voted yes but emphasized that if the ethics language around preventing conflicts of interest (most notably regarding the Trump family) is not resolved, he will vote no when the bill reaches the full Senate.
The updated bill text also added important provisions for DeFi, including the Blockchain Regulatory Certainty Act, which clarifies that non-custodial developers are not money transmitters. However, language was added that if a non-custodial developer has the "specific intent" to transfer funds and knows those funds are for criminal means, they can still be charged criminally. For example, it is a provision that would not have changed the outcome of the Roman Storm case, because they were aware of the possible illicit interactions occurring on their platform.
While this compromise was largely interpreted as a win for the crypto industry, JPMorgan CEO Jamie Dimon emerged as a vocal opponent late in the month, signaling that JPMorgan and other major US banks plan to actively fight the CLARITY Act in its current form. Dimon argued that the legislation allows crypto firms to effectively pay interest on deposits or stablecoins without the protections traditional banks are subject to, and that the bill additionally fails to adequately address Anti-Money Laundering requirements and the Bank Secrecy Act. The crux of the issue continues to be the same dispute that has dominated the year, banks argue that even the activity-based rewards permitted under Section 404 could accelerate deposit flight to crypto firms like Coinbase, which offer bank-like products without comparable regulatory oversight. With Dimon now publicly leading the bank pushback, the full Senate may face renewed resistance even after the Banking Committee's bipartisan vote.
The bill now heads to a full Senate vote, where 60 votes are needed for passage. While this represents an important step forward, the unresolved ethics concerns mean the final vote remains far from certain, but the momentum has clearly shifted in favor of broader crypto market structure legislation.
In parallel, the European Central Bank's Christine Lagarde took a notably more cautious stance, flagging euro-denominated stablecoins as a financial stability risk. Lagarde argued that the risks to financial stability and monetary-policy transmission outweigh any benefit to the euro's global standing, diverging from the position publicly backed by Bundesbank President Joachim Nagel in February. Her concerns centered on bank runs, depeg risks reminiscent of the 2023 SVB-Circle episode, deposit substitution narrowing the bank lending channel, and broader fragmentation risk. This contrasts the initiative of the Qivalis consortium from the major European banks, which we've covered in previous newsletters, that has also expanded its euro stablecoin coalition to 37 banks this month. As of late, England has been pivoting from their previously conservative stance, where now the Bank of England, which outlined its own tokenization and stablecoin vision later in the month, signaled that future retail payment systems should feature multiple forms of interchangeable money, including tokenized deposits and stablecoins.
May was particularly an important month for Hyperliquid. The most consequential development was Coinbase becoming Hyperliquid's official USDC treasury deployer as the Aligned Quote Asset, with USDH set to sunset over time. As part of the transition, Native Markets, the operator of Hyperliquid's stablecoin USDH, agreed to grant Coinbase the right to purchase USDH brand assets. This unifies all stablecoins on Hyperliquid under USDC. Even more importantly, this means that roughly 90% of all the revenue coming from the USDC treasury, as a result of its deployment on Hyperliquid, will be routed towards buying back the Hyperliquid token. The arrangement is speculated to generate around $170 million in annualized buyback fees, marking one of the biggest stablecoin-related deals in DeFi.
On the product side, Hyperliquid also rolled out validator-governed prediction markets, advancing the HIP-4 Outcomes proposal we covered in the February's newsletter. The platform now supports outcome markets tied to off-chain events, with the markets published through automated newsfeed software and governed by validators.
However, this growth attracted significant pushback from traditional players. Both Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange, and CME group have been actively pressing US regulators to rein in Hyperliquid. ICE itself held multiple talks with Hyperliquid this month to evaluate the on-chain perps market, despite simultaneously pressuring regulators. ICE's CEO mentioned that they're not bothered by the existence of Hyperliquid, but rather by the inequality of treatment by the regulators, painting a less negative stance towards perpetual futures in the US than it may have originally seemed.
That was almost the end of it for perpetual futures, until the CFTC came out with a ruling at the very tail end of May. The CFTC staff issued an advisory opening the door for crypto perpetual future contracts to be listed by CFTC-registered exchanges in the US, charting a path for one of the most liquid segments of the crypto asset markets to exist within the US regulatory framework. This had been telegraphed for months by Chairman Michael Selig. Importantly, the ruling is a staff advisory rather than a formal rulemaking, meaning it carries the same fragility as Selig's earlier interim guidance and could be reversed by a future commission. Coinbase and Kalshi are reportedly already moving forward to take advantage of the new clarity. The timing matters: in the context of the ICE and CME pressure on Hyperliquid, the CFTC has now established a regulated, US-based pathway for the perpetual products that have driven so much of Hyperliquid's growth this year, putting traditional exchanges in a position to potentially compete with on-chain venues domestically for the first time.
Lastly, institutional engagement with crypto infrastructure continued, with Circle's Arc blockchain raise standing out as the month's headline event. Circle raised $222 million for its Arc blockchain token sale at a $3 billion valuation. The presale included an impressive roster of Wall Street heavyweights and crypto-native firms, including BlackRock, Apollo Funds, a16z crypto, ARK Invest, Bullish, Haun Ventures, Intercontinental Exchange, and Standard Chartered Ventures. Sixty percent of the ARC token is being distributed to the community, signaling Circle's intent to balance institutional involvement with decentralization.
Citrea this month rolled out Token Genesis Event (TGE) for its native CTR token. The protocol introduces a "gauge” system to direct voting toward pools of capital, alongside a vote-escrow staking model that primarily rewards active governance participation. Only xCTR used for voting will earn liquidity emissions on the pools they vote for, while staked CTR that remains inactive will only earn unstaking penalty fees. Unstaking happens over a 90-day window, with instant exits incurring a 50% flat penalty fee, while the remaining options see a variable decaying penalty from 50% down to 0%. The design clearly encourages long-term, active participation while preserving an exit ramp for those who need earlier liquidity.
Unfortunately, StablR's two stablecoins, EURR and USDR, depegged after an attacker exploited a critical weakness in StablR's minting multisig. There was a 1 out of 3 signature threshold where a single private key compromise was enough to take control. Once inside, the attacker added themselves as an administrator, replaced the existing owners, and minted approximately $13.5 million in unbacked tokens, 8.35 million USDR and 4.5 million EURR. The incident fits cleanly into a broader operational security trend that has defined the year, and reinforces that for stablecoin issuers in particular, a single-signer or low-threshold multisig setup is a critical vulnerability rather than an acceptable shortcut. Industry's focus at large has been on smart-contract safety until now, but it will become interesting to observe whether industry's focus will also start getting pointed towards operational security setups as well.
Lastly, Saga announced a significant structural transition at the very end of May, selling its crypto arm to Alapin Holdings (part of the dao5 family) and pivoting fully to AI agents through the newly launched Saga AI Labs. Saga AI Labs is now focused on persistent AI characters and synthetic relationships, autonomous digital personalities designed to interact with audiences continuously across social platforms, messaging apps, games, and digital marketplaces.
