When you look at what’s standing in the way of advancing the crypto sector’s primary goal in Washington (the Clarity Act legislation), there’s only so much that the industry can control: stablecoin rewards.
That’s not the only issue that could derail the bill to finally establish a custom legal foundation for crypto markets in the US, but it is the one that industry experts have a strong influence on. Companies like Coinbase have been aggressively defending that trading territory, wanting to continue providing incentives for customers to engage with stablecoins on their platforms.
But Wall Street banking lobbyists stepped in and argued that earning returns from stablecoin accounts is a lot like earning interest from savings accounts, and if the former kills the latter, the death of the deposit business means the strangulation of bank lending. That argument resonated 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 been tightening, and the resulting impasse will be increasingly difficult to overcome as the weeks go by, until the peculiarities of the Senate’s own calendar can effectively push the whole disaster towards 2027.
Advantage?
Until now, the cryptocurrency side has argued that it has the upper hand, because the cryptocurrency bill that has already been signed into law (the National Innovation Guidance and Establishment for U.S. Stablecoins (GENIUS) Act) appeared to allow third-party platforms like Coinbase to offer rewards tied to other issuers’ tokens, such as Circle’s. However, a recently proposed rule by the Office of the Comptroller of the Currency that is implementing GENIUS concluded that such relationships may violate the intent of the law, leaving the crypto world’s confidence a bit shaken.
The last time crypto and banking negotiators sat down with White House officials, President Donald Trump’s crypto advisers appeared to favor a compromise that would allow some rewards, not just for owning stablecoins, but for using them for transactions and to support crypto infrastructure. Crypto experts felt confident in their influence, with GENIUS behind them and the White House favoring certain rewards.
But bank 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. Bankers have yet to raise their hands to move beyond their previous position that virtually all categories of rewards need to be banned, even though the White House has set the end of February as an informal (unmet) deadline to reach a deal.
So where does that leave things?
Banks can resist, and if they continue to present the rewards of stablecoins as an existential threat to the traditional financial system and traditional lending, they could keep their allied legislators on their side at the fatal expense of the Clarity Act. What they risk is that the GENIUS Act remains the law of the land at this point. The OCC’s latest work may help bolster its confidence that strict limits will be placed on rewards, but that agency’s final rule would have to land on a very restrictive interpretation.
The crypto industry may also resist, and if it can successfully lobby against the OCC’s proposed rule, it may still succeed in preserving the stablecoin reward programs it believes should be allowed under the wording of the GENIUS Act. But that may come at the cost of the Clarity Act, which is the most important political goal since the birth of cryptocurrencies.
Regulations either way
Would the lack of clarity mean the industry continues without US regulations? Probably not, because US markets 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 a new law, so it would be reasonably easy to dismantle or revise the rules in the event of future leadership changes at those agencies.
As if that weren’t enough for cryptocurrency dealmakers to consider, there’s this: If they were to somehow capitulate on the performance of stablecoins, and the bill advanced along partisan lines through the Senate Banking Committee (as it already did through the Senate Agriculture Committee), the sacrifice of the crypto industry offers no guarantee that the effort will pass the rest of the Senate.
The problem is that Democratic senators have asked for a few other important items in this bill, and so far those requests have gone unanswered. They want stronger defenses against illicit cryptocurrency finance, especially focused on the decentralized finance (DeFi) space, and some of the Democrats’ past ideas were criticized by the industry as DeFi death threats. They also want politically risky limits on the personal crypto trading ties of top government officials, and most significantly, President Trump. And they demand that vacant Democratic seats on the CFTC and SEC be filled.
None of the points represent insurmountable obstacles, but in the months of talks they have not yet been overcome. Some of the requests, such as commission nominations, would depend on the will of the White House.
Meanwhile, the clock is ticking on the Senate floor in 2026 for a major legislative achievement. Since we are in a midterm election year, lawmakers will barely work in the Senate after the end of July. And aside from the practicalities of scheduling, the proximity of a passionate campaign erodes the chances of parties uniting around a bill.
At this stage, insiders on the crypto side of the conversations have expressed frustration at the bankers’ unwavering stance, even as digital asset companies appear set to abandon stablecoin rewards in accounts that simply hold the tokens (like a bank account). Still, people like Coinbase CEO Brian Armstrong (“We’re going to reach a win-win outcome”) and Ripple CEO Brian Garlinghouse (who predicts an 80% chance of approval) have tried to maintain the industry’s confidence.
That optimism appears to have kept Polymarket bettors in favor of passage of the Clarity Act this year above a coin toss, currently at 70%.
In the coming weeks, the crypto industry may be forced to decide whether it is worth making some kind of additional sacrifice in stablecoin rewards to remove one of the main impediments to advancing a bill. And banks may have to decide whether they can cope with the GENIUS Act’s treatment of stablecoins as is. So far, neither of them have moved and the tension is rising.
