Stablecoins face delay as CLARITY Act deadlocks on rewards

TLDR

• Banks reject White House stablecoin-reward compromise, freezing progress on CLARITY Act.
• Fears of deposit flight if nonbanks pay yields rivaling insured deposits.
• Trump presses Congress; TD Cowen says real leadership engagement needed to break deadlock.

The crypto market bill has hit another impasse after major banks rejected a White House compromise over stablecoin rewards, keeping the CLARITY Act from advancing. As reported by CoinGape, the sticking point is whether and how platforms can pay rewards on customer stablecoin holdings under federal law.

At the center of the dispute is the prospect of deposit flight if nonbanks can pay yields that compete with insured deposits. Crypto firms counter that reasonable rewards are integral to adoption and that an outright ban would entrench incumbents at the expense of innovation.

Donald Trump has publicly pressed Congress to pass the CLARITY Act and criticized banks for trying to hold the bill “hostage,” signaling pressure from the executive branch to resolve differences. According to FXStreet, the legislative logjam still hinges on the structure and permissibility of stablecoin rewards.

Analysts at TD Cowen told The Block that social media posts alone are unlikely to move negotiations and that direct, sustained engagement from the White House and congressional leadership may be necessary to break the deadlock.

What the stablecoin rewards proposal changes and who it affects

White House advisors, including Patrick Witt, have floated a compromise to limit rewards to activity-linked uses , for example, tying accruals to payments or on-chain transactions , rather than paying interest-like returns on idle balances. As reported by Cointelegraph, the aim is to curb passive yield that could resemble bank-like interest while preserving incentives for real-world utility.

Banking trade groups, including the American Bankers Association, have urged a total ban on stablecoin yields paid by nonbanks, arguing that even activity-linked rewards could still erode deposit funding over time. As reported by CoinCentral, their position frames rewards as a functional substitute for interest that could disadvantage regulated depository institutions.

Standard Chartered has estimated that allowing stablecoin yield could pull roughly $500 billion in deposits from U.S. banks by end-2028. According to Channels TV, that projection underscores why banking groups view reward-bearing stablecoins as a systemic funding risk, even if rewards are narrowed to specific activities.

Regulators have emphasized the need for timely legislation to avoid ceding ground internationally. “A bill needs to get done,” said U.S. Treasury Secretary Scott Bessent, warning that prolonged ambiguity could leave the U.S. behind peers setting clearer rules for digital assets.

Crypto platforms see the compromise differently, cautioning that over-narrowing rewards would be anti-competitive and could push activity offshore. Baker McKenzie noted that while several industry groups support moving forward, Coinbase and others oppose provisions they view as unworkable , particularly those constraining stablecoin rewards and altering existing jurisdictional lines.

At the time of this writing, Bitcoin (BTC) trades near $72,666 with medium volatility of 3.86% and an RSI around 55.73. Market gauges show a neutral tilt versus longer-term averages (SMA50 near 76,546; SMA200 near 96,527).

Explainer: activity-linked rewards versus idle-balance yield

Activity-linked rewards accrue only when users transact , for example, making payments, settling invoices, or moving funds through approved on-chain workflows. Policymakers view this as a way to encourage real economic use while curbing passive, savings-like returns outside the banking perimeter.

Idle-balance yield pays a return simply for holding a stablecoin over time, functionally mirroring interest on deposits. Banks argue this structure would compete directly with insured deposits and could amplify funding stress during risk-off cycles.

In practice, activity-linked designs rely on verifiable actions, caps, and disclosures to avoid resembling deposit-taking. Idle-yield models are harder to separate from traditional interest, raising prudential and consumer-protection questions about who bears liquidity, credit, and operational risks.