The White House is accelerating a March 1 deadline for the CLARITY Act, but talks are stuck over stablecoin rewards, which banks see as a threat to deposits and crypto firms view as essential for competition and growth. The final compromise will likely decide how much yield-based competition stablecoins can have against traditional banking.
The CLARITY Act has been a long time coming, with some industry experts now saying the White House is setting a March 1 deadline for both sides to reach a unanimous agreement.
On February 10, the White House hosted a stablecoin yield meeting, one of the most contentious elements of the bill, bringing together representatives from the banking sector and the cryptocurrency industry. According to reports from people on site, the meeting was “productive”, yet a compromise has yet to be reached.
Coinbase CEO Brian Armstrong emerged as one of the most prominent critics of the Senate draft, raising concerns that the legislation could amount to a de facto ban on tokenized equities and impose restrictions on decentralized finance (DeFi) that the crypto community views as undermining financial privacy. Armstrong is not alone in his opposition, as broader crypto community sentiment has also not been as welcoming of the bill.
Another key caveat at stake is who controls the digital dollar and whether US-based crypto firms can compete with traditional banks and overseas jurisdictions offering more flexible frameworks.
Why stablecoin rewards matter?
Stablecoin rewards function similarly to interest offered by traditional banks, typically generated from income on government bonds or lending.
According to Joshua Chu, a lawyer, lecturer, and co-chair of the Hong Kong Web3 Association, stablecoin rewards have become a core driver of liquidity and user retention for many exchanges today. They compete with traditional savings and DeFi, thus forming a revenue stream.
Coinbase reported $355 million in stablecoin revenue in the third quarter of 2025 alone, accounting for 47% of the revenue generated by its Subscription & Services division. That income is primarily derived from interest earned on USDC balances held on the platform.
“Stablecoin rewards themselves are not the core profit engine, but they are a key mechanism for attracting and retaining customers, encouraging users to hold larger stablecoin balances, which in turn drives reserve-based revenue,” Nic Puckrin, a digital assets analyst and co-founder of the Coin Bureau, said.
However, Eli Cohen, General Counsel at Centrifuge, argued that the issue may be more concentrated than it appears.
“I think this is principally a Coinbase issue. I am not aware of other exchanges where this is a significant part of their business model.”
Cohen also suggested that the market impact of restricting stablecoin rewards would depend heavily on the final legislative language. If a compromise allowing activity-based yield, such as rewards linked to investment in tokenized real-world asset (RWA) products, is included in the final bill, he does not expect significant disruption. In that scenario, he said, users could shift from a stablecoin holding model to a stablecoin investment model, similar to brokerage cash sweeps into money market funds.
Financial stability or competitive protection?
The disagreement over stablecoin rewards is rooted in deeper concerns about deposit flight and financial system stability.
Daniel Bara, Director of the Olympus Association, pointed to modeling from major financial institutions. The Federal Reserve published an analysis in December modeling up to $400 billion in loan contraction under moderate stablecoin adoption, while Standard Chartered projects around $500 billion leaving developed-market banks by 2028.
Those projections are often cited by banks as evidence of systemic risk. Bara framed the issue differently.
“What banks describe as a threat to financial stability also looks like consumers getting access to competitive returns on their own money for the first time in decades. Lawmakers have to balance both concerns, and how they draw that line will shape financial competition for the next decade.”
Other experts have similarly acknowledged that stablecoin yields could be perceived as competitive pressure on traditional banks.
“The Clarity Act is attempting to preserve the status quo for traditional banks while also supporting the burgeoning digital asset ecosystem… stablecoin yields in particular are seen as a threat to traditional bank deposits, so limiting them narrows the competitive gap between banks and crypto exchanges,” Coin Bureau’s Puckrin noted.
Hong Kong Web3 Association’s Chu went further, arguing that limiting deposit-like yields could effectively reinforce the traditional banking deposit model.
Winners and losers
If the CLARITY Act passes in its current form, experts say the immediate impact would not be evenly distributed.
“At this point, the draft benefits banks the most, as it protects them from stablecoin yield competition,” Puckrin said. While stablecoin issuers could benefit from regulatory clarity, platforms heavily reliant on rewards may face short-term pressure.
Chu similarly argued that traditional banks would benefit domestically from reduced competition. Internationally, however, he suggested jurisdictions with more innovation-friendly frameworks could attract capital and businesses if US rules are viewed as overly restrictive.
Olympus Association’s Bara described the broader stakes as a battle over control of dollar-denominated savings, noting that even when legislation restricts direct yield, economic incentives do not disappear; they adapt.
A necessary step, but on whose terms?
Despite disagreement over stablecoin rewards, experts consistently stressed the importance of regulatory clarity.
“The Clarity Act is incredibly important for the digital asset sector as a whole because it would close the door on the regulatory uncertainty that has always held back innovation,” Puckrin said, cautioning that waiting too long could be as risky as making excessive concessions.
Chu noted the debate surrounding the CLARITY Act could ultimately be around who controls stablecoins. He highlighted the US’s “tunnel vision” risks overlooking global competition, including interest-bearing central bank digital currencies (CBDCs) abroad, in a contest between protecting legacy rails and enabling truly competitive digital finance.
However, other experts noted the debate centers more around composability and utility for stablecoins.
“It is difficult for legislators and their staff to try to fit new financial modes into existing frameworks. This has been an issue for the crypto markets generally since inception and will continue to be an issue long after the market structure bill issues are resolved,” Cohen said.
The final compromise could determine whether US policy primarily preserves existing banking structures or meaningfully integrates crypto-native competition into the financial system.
