Congress Has Weeks to Pass CLARITY Act Before Midterms Stall Crypto Bill
Banks are pushing Congress to close a stablecoin rewards loophole before the CLARITY Act's window closes in late April or early May. A 3-to-1 survey margin shows public support for prohibitions on stablecoin yield.
Key Takeaway
Without passage by May, stablecoin yield rules stay ambiguous through midterms and beyond.
The Senate's CLARITY Act faces a closing window of late April or early May before election-year politics make passage nearly impossible.
The CLARITY Act stalled after negotiations broke down, leaving the crypto industry's biggest regulatory question unanswered: whether stablecoins can offer rewards resembling bank interest. The GENIUS Act, signed into law in July 2025, requires stablecoins to be fully backed by cash or cash equivalents and bars issuers from paying yield directly. But it left the three-party model ambiguous—whether intermediaries like exchanges can pass economic value to customers.
The Office of the Comptroller of the Currency proposed a rule that would presume prohibited yield if an issuer funds an affiliate or third party that then pays yield to stablecoin holders. Bank groups urged lawmakers to close the stablecoin rewards loophole before reward structures spread more widely. They pointed to a survey conducted by the American Bankers Association and Morning Consult showing respondents agreeing by a 3-to-1 margin with congressional prohibitions on stablecoin rewards. The same survey found a 6-to-1 margin saying stablecoin laws should be cautious to avoid undermining the existing financial system.
Standard Chartered estimated in January that stablecoins could draw ₱29.89 trillion ($500 billion) from US bank deposits by the end of 2028. Banks claim rewards would encourage that migration, reducing their lending capacity. Coinbase CEO Brian Armstrong argued that stablecoin issuers operate under stricter reserve requirements than banks under the GENIUS Act. Crypto industry advocates said incentives tied to payments, wallet usage or network activity would help digital dollars compete with older payment rails.
The Congressional Research Service issued a report on March 6 highlighting ambiguities in the GENIUS Act around stablecoin yield. Section 404 makes the same stablecoin reward look lawful or risky depending on whether it's framed as interest, a perk, a rebate, or a loyalty benefit. The White House attempted a compromise framework earlier this year allowing rewards in narrow use cases, but it never gained traction. Boston Consulting Group estimated that ₱251.08 trillion ($4.2 trillion) of the ₱3.71 quadrillion ($62 trillion) in gross stablecoin transfer volume last year represented real economic activity.
This article was written based on reporting from CryptoSlate.
