TLDR
Banking trade groups are pushing hard to rewrite the CLARITY Acts compromise on stablecoin rewards, arguing it still threatens bank deposits.
- The current draft would ban passive interest on stablecoin balances but still allow activity based rewards, a structure crypto firms largely support.
- Major US banking lobbies say these rewards could still act like deposit substitutes, citing risks of deposit flight and pressure on traditional lending.
- Lawmakers are moving toward a May 14 Senate Banking Committee vote, so the fight over rewards could decide whether the bill advances at all.
Deep Dive
1. What The CLARITY Act Does On Stablecoin Rewards
The Digital Asset Market Clarity Act (CLARITY Act) sets a federal market structure for crypto and carves out specific rules for payment stablecoins.
A bipartisan compromise led by Senators Thom Tillis and Angela Alsobrooks would prohibit rewards that are "economically or functionally equivalent" to bank deposit interest on idle stablecoin balances, while still allowing rewards tied to genuine use, such as payments or platform activity.[\[source\]]()
Crypto firms like Coinbase and Circle have endorsed this model, seeing it as a way to keep promotional and usage based rewards alive while accepting that stablecoins should not look like savings accounts.[\[source\]]()
If passed largely as drafted, US facing earn products on stablecoins would likely pivot toward cashback, fee rebates, and activity based incentives instead of simple interest on idle balances.
2. Why Banking Groups Are Fighting The Compromise
Leading banking lobbies, including the American Bankers Association and Bank Policy Institute, argue the draft still leaves loopholes that let crypto firms create yield like products that compete with insured deposits.[\[source\]]()
They warn that stablecoin rewards tied to balances or holding periods could encourage customers to park cash in tokens rather than bank accounts, with one cited analysis claiming this might shrink consumer and small business lending by roughly one fifth.[\[source\]](https://cryptoslate.com/banking-lobby-attempts-to-kill-clarity-act-stablecoin-progress-as-markup-is-scheduled-for-next-week/)
Banks also complain that, because of SEC guidance like SAB 121, they face heavier capital treatment than non bank issuers, so allowing any form of stablecoin yield without fixing that asymmetry would lock in a structural disadvantage.[\[source\]](https://www.coinspeaker.com/clarity-act-news-banks-push-back-stablecoin/)
The fight is as much about competitive moat and balance sheet economics as about systemic risk, which is why bank groups are pushing for an almost total ban on rewards.
3. What To Watch Next For Markets And Users
The Senate Banking Committee has scheduled a markup for May 14 to debate and amend the CLARITY Act, with the White House and key senators publicly targeting passage in mid 2026.[\[source\]]()
If banking groups win stricter language, US regulated platforms could be forced to strip back most stablecoin incentives, narrowing yields and pushing some users toward offshore venues that still offer interest like products.
If the current compromise survives, centralized platforms and some DeFi front ends will likely redesign rewards around usage, which can still support adoption but with a clearer separation from bank style deposits.
For stablecoin users, the key signal is whether the final text targets only passive interest or most forms of rewards, since that will shape which yield products remain viable in the US.
Conclusion
The clash over stablecoin rewards in the CLARITY Act is really a battle over who gets to offer dollar like yield products at scale.
A compromise that bans passive interest but permits activity based rewards could unlock long awaited US regulatory clarity while still constraining bank style competition, whereas a full crackdown on rewards would favor the banking sector and push more yield seeking stablecoin use offshore.
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