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Crypto Leaders Draft Changes as CLARITY Act Nears Senate Release

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Crypto Breaking News

Focus on Stablecoin Rules

The proposed changes target provisions related to stablecoin rewards and yield programmes. Industry participants have raised concerns about limits on how firms distribute incentives to users. Moreover, current language allows only activity-based rewards while restricting returns linked to idle balances. Coinbase has taken a central role in opposing the existing compromise on stablecoin yields. Company representatives argue that the restrictions could weaken user participation and reduce innovation. Additionally, industry analysts have supported calls for clearer and more flexible rules.

Senator Thom Tillis plans to publish the draft text in the coming days. The release will outline detailed provisions on stablecoin rewards and broader regulatory measures. Besides, lawmakers continue to engage stakeholders while refining the bill. Lawmakers from both parties have worked to align positions on the crypto legislation. Senator Tim Scott confirmed ongoing coordination between Congress and the White House. Hence, the process reflects efforts to reach consensus before formal review stages begin.

Senator Cynthia Lummis has responded to concerns about decentralised finance protections in the bill. She stated that recent revisions aim to strengthen safeguards for developers and blockchain networks. Moreover, she emphasised continued bipartisan cooperation on these provisions. The legislation seeks to address tensions between traditional banks and crypto firms. Lawmakers have attempted to balance stablecoin reward structures with concerns over deposit shifts. Consequently, negotiations have focused on maintaining financial stability while supporting innovation.

Timeline for Review

The Senate is expected to move toward a markup phase in April. This stage will allow lawmakers to review and amend the draft text. Additionally, stakeholder input could influence final adjustments before further legislative steps. Recent developments have affected expectations around the bill’s progress. Prediction data indicates declining confidence in near-term passage. However, discussions remain active as both sides continue negotiations. Crypto leaders continue to push for revisions as the CLARITY Act advances toward formal review. The upcoming draft release will shape the next phase of negotiations. Consequently, the outcome will depend on how lawmakers address industry concerns.

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Crypto World

Aave’s TVL Falls $8B After $293M Kelp DAO Hack

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Aave’s TVL Falls $8B After $293M Kelp DAO Hack

Total value locked on decentralized lending protocol Aave dropped by nearly $8 billion over the weekend after hackers behind the $293 million Kelp DAO exploit borrowed funds on Aave, leaving roughly $195 million in “bad debt” on the protocol and triggering withdrawals.

Data from DeFiLlama shows that Aave’s TVL fell from about $26.4 billion to $18.6 billion by Sunday, losing the top spot as the largest DeFi protocol. 

Aave v3’s lending pools for USDt (USDT) and USDC (USDC) are now at 100% utilization, meaning that more than $5.1 billion worth of stablecoins cannot be withdrawn until new liquidity arrives or borrows are repaid. 

$2,540 is available to be withdrawn from the $2.87 billion USDT pool on Aave v3 at the time of writing. Source: Aave

Aave’s TVL fall shows how rapidly risk from a single security incident can spread throughout the broader, interconnected DeFi lending market, potentially leading to a severe liquidity crisis.

The incident began on Saturday when hackers stole 116,500 Kelp DAO Restaked ETH (rsETH) tokens worth about $293 million from Kelp DAO’s LayerZero-powered bridge and used them as collateral on Aave v3 to borrow wrapped Ether (wETH).

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Crypto analytics platform Lookonchain said the move created about $195 million in “bad debt” on Aave, which contributed to the Aave (AAVE) token tanking nearly 20% from $112 on Saturday at 6:00 pm UTC to $89.5 about 25 hours later. 

Lookonchain noted that some of the largest crypto whales to withdraw funds from Aave were the MEXC crypto exchange and Abraxas Capital at $431 million and $392 million, respectively.

Source: Grvt

Several crypto networks and protocols tied to rsETH or the LayerZero bridge have paused use of the bridge until the problem is resolved, including DeFi platform Curve Finance, stablecoin issuer Ethena and BitGo’s Wrapped Bitcoin (WBTC).

Aave has frozen several rsETH, wETH markets

Shortly after the Kelp DAO exploit, Aave said it froze the rsETH markets on both Aave v3 and v4 to prevent any suspicious borrowing and later stated that rsETH on Ethereum mainnet remains fully backed by underlying assets.

WETH reserves also remain frozen on Ethereum, Arbitrum, Base, Mantle and Linea, Aave said.

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This incident marks the first significant stress test of Aave’s “Umbrella” security model, which was introduced in June 2025 to provide automated protection against protocol bad debt while enabling users to earn rewards.

Related: Aave DAO backs V4 mainnet plan in near-unanimous vote

Earlier this month, the Bank of Canada found that Aave avoided bad debt in its v3 market by using overcollateralization, automated liquidations and other strategies that shifted risk to borrowers.

In comments to Cointelegraph, Aave defended its liquidation-based model, framing it as a core safety mechanism that protects lenders while limiting downside for borrowers.

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It comes as Aave parted ways with its longest-standing DeFi risk service provider, Chaos Labs, on April 6, following disagreements over the direction of Aave v4 and budget constraints.

Magazine: Are DeFi devs liable for the illegal activity of others on their platforms?