If you break down what stands in the way of advancing the crypto sector’s top goal in Washington — Clarity Act legislation — the part of the debate that the industry can control is narrow: stablecoin rewards.
It’s not the only issue that could potentially derail the bill to finally establish a tailored legal foundation for crypto markets in the US, but it’s one that industry insiders have a strong influence on. Companies like Coinbase have vehemently defended this line of business, wanting to keep giving customers incentives to engage with stablecoins on their platforms.
But Wall Street banking lobbyists swooped in, making an argument that getting returns on stablecoin accounts is a lot like getting interest on savings accounts, and if the former kills the latter, the death of the deposit business means a stranglehold on bank lending. That argument stuck with enough lawmakers on both sides of the aisle to stop the Senate’s Digital Asset Market Clarity Act in its tracks.
The heels have dug in, and the resulting impasse will become harder to break as the weeks fly by until the Senate’s own calendar errors could effectively push the whole mess toward 2027.
Overhand?
Until now, the crypto side has argued that it has the upper hand because the crypto bill already passed into law — the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act — appeared to allow third-party platforms like Coinbase to offer rewards tied to other issuers’ tokens, such as Circles. However, a recent proposed rule from the Office of the Controller of the Currency implementing GENIUS concluded that such conditions may violate the intent of the law, leaving the confidence of the crypto world somewhat shaken.
The last time crypto and banking traders sat down with White House officials, President Donald Trump’s crypto advisers seemed to favor a compromise that would allow some rewards — not for just holding stablecoins, but for actually using them for transactions and to support crypto infrastructure. Crypto insiders felt confident in their leverage, with GENIUS behind them and the White House favoring certain rewards.
But banking representatives haven’t necessarily seen the White House in the driver’s seat because the White House doesn’t get a vote to advance the Senate bill. The bankers have not yet raised their hands to go beyond their previous position that virtually all categories of rewards should be banned, despite the fact that the White House has set the end of February as an informal (unmet) deadline for compromise.
So where does that leave things?
The banks may hold out, and if they continue to cast stablecoin rewards as an existential threat to the traditional financial system and Main Street lending, it may keep their allied lawmakers on their side at the fatal cost of the Clarity Act. What they risk is that the GENIUS Act remains the law of the land on this point. The OCC’s recent work may help bolster their confidence that strict reward limits will be put in place, but that the final agency rule must land on a very restrictive interpretation.
The crypto industry may also hold out, and if it can successfully lobby against the OCC’s proposed rule, it may still be able to preserve stablecoin reward programs that it believes should be allowed under the wording of the GENIUS Act. But it could come at the expense of the Clarity Act, which is the most important policy goal since the birth of crypto.
Regulations both ways
Would an absence of clarity mean the industry continues without US regulations? Probably not, because the US market regulators – the Securities and Exchange Commission and the Commodity Futures Trading Commission – are working on rules that will define their crypto jurisdictions. The downside, however, is that it would be done without the basis of new law, so the rules would be reasonably easy to withdraw or revise during future management changes in these agencies.
As if that wasn’t enough for the crypto traders to consider, there’s this: If they somehow capitulate on the stablecoin dividend and the bill moves along party lines through the Senate Banking Committee (as it already did through the Senate Agriculture Committee), the victims of the crypto industry have no guarantee that the rest of the Senate effort will pass.
The problem is that Democratic senators have asked for some other important points in this bill, and so far those requests have gone unanswered. They want more vigorous defenses against illicit finance in crypto, particularly focusing on the decentralized finance (DeFi) space, and some of the Democrats’ previous ideas were dismissed by the industry as DeFi death threats. They also want politically tough limits on the personal crypto business dealings of senior officials — most importantly, President Trump. And they demand that vacant Democratic seats be filled on the CFTC and SEC.
Neither point represents impassable roadblocks, but in the months of negotiations, they have not been cleared yet. Some of the requests — such as commission nominations — would depend on the willingness of the White House.
Meanwhile, the clock is ticking on 2026 Senate floor time for a major legislative feat. Because this is a midterm election year, lawmakers are unlikely to work in the Senate beyond the end of July. And aside from the practicalities of scheduling, the proximity of hot-blooded campaigns erodes the chances that the parties can come together on a bill.
At this stage, insiders on the crypto side of the negotiations have expressed frustration with the unwavering position of the banks, although the digital asset companies have appeared ready to give up stablecoin rewards in accounts where the tokens are simply held (like a bank account). Still, the likes of Coinbase CEO Brian Armstrong (“We’re going to reach a win-win-win result”) and Ripple CEO Brian Garlinghouse (who predicts an 80% chance of passage) have tried to maintain industry confidence.
This optimism appears to have kept Polymarket punters favoring the passage of the Clarity Act this year over a coin change, currently at 70%.
In the coming weeks, the crypto industry may be forced to decide whether some kind of additional sacrifice on stablecoin rewards is worth removing one of the biggest obstacles to passing a bill. And the banks may have to decide whether they can contend with the GENIUS Act’s treatment of stablecoins as it stands. So far, neither has moved, and the tension is building.
