Clarity Act stalls as stablecoin rewards fight

TLDR

The US CLARITY Act, a major crypto market structure bill, has hit a pause because banks and crypto firms are fighting over whether stablecoin balances can earn rewards.

1. The bill advanced out of one Senate committee but is stuck as the Banking Committee delays work amid disagreement on stablecoin yield provisions.
2. Banks warn that high-yield rewards on stablecoins could drain hundreds of billions of dollars from bank deposits, while firms like Coinbase defend rewards as consumer-friendly.
3. The White House is now mediating; outcomes range from capped rewards under bank-like rules to long delays that keep US stablecoin regulation uncertain.

Deep Dive

1. Where The CLARITY Act Stands

The CLARITY Act is a broad US digital asset and market structure bill that would define how key crypto assets, including stablecoins, are regulated and which agencies oversee them.

The Senate Agriculture Committee has already advanced its portion of the bill, but the more powerful Senate Banking Committee has repeatedly postponed markup as disputes over stablecoin rewards dominate negotiations. Reports describe the Act as hanging in the balance, with White House crypto adviser David Sacks mediating between Coinbase, banking trade groups, and crypto advocates over the rewards issue.

2. Why Stablecoin Rewards Are So Controversial

At the core is whether platforms can pay yield-like rewards on stablecoin balances, similar to bank interest. Coinbase currently offers around 3.5% on USDC balances, which has become the flashpoint.

Bank lobby groups argue that allowing such rewards without full banking regulation turns stablecoins into deposit competitors and could accelerate deposit flight. A Standard Chartered analysis cited in coverage estimates stablecoins could eventually pull up to $500 billion from bank deposits, with regional lenders most exposed. Crypto firms respond that banks are trying to ban their competition rather than compete on product quality.

3. What To Watch Next For Crypto Users

The White House has convened banking and crypto representatives to explore compromise on yield, which could inform a revised bill text. Outcomes could include:

1. Allowing rewards but capping rates and imposing bank-like capital, disclosure, and liquidity rules on issuers and platforms.
2. Restricting rewards to bank-issued or bank-partnered stablecoins.
3. Continued stalemate, pushing passage of the CLARITY Act beyond 2026 and prolonging uncertainty.

For stablecoin users and builders, the key signals are any draft language defining rewards, new licensing categories, and whether existing USDC or USDT reward programs must change.

Conclusion

The CLARITY Acts stall shows that US stablecoin policy now hinges on a narrow but critical question about rewards and deposit competition, not on banning stablecoins themselves. How lawmakers resolve that tradeoff will shape whether stablecoins function as pure payment tools or as interest-bearing dollar substitutes, and it will influence where serious stablecoin innovation happens over the next few years.