The White House hosted its third round of CLARITY Act negotiations today, with top legal officers from Coinbase and Ripple sitting down alongside banking representatives to try to break the deadlock over stablecoin yields. The clock is ticking with eleven days to go to find a compromise.
The White House hosted a third stablecoin yield meeting on Thursday morning, bringing together a small group of crypto executives and banking representatives as negotiations over the CLARITY Act continue to intensify and hang in the air.
According to Coinbase Chief Legal Officer, Paul Grewal, the dialogue was “constructive and the tone cooperative”, but sources familiar with the outcome of the meeting told crypto publication The Block that a compromise is yet to be reached.
At stake is not just how stablecoins function within the US financial system, but who ultimately controls dollar liquidity in digital markets.
Armstrong optimistic CLARITY Act “will get done”
Coinbase CEO Brian Armstrong initially opposed the draft, citing concerns over a ban on tokenized equity, limitations on stablecoin rewards, and a power shift from the Commodity Futures Trading Commission (CFTC) to the Securities and Exchange Commission (SEC). Famously stating the industry would rather have “no bill than a bad bill”.
However, in a recent AMA hosted on Twitter, Armstrong was quick to correct the company’s stance, noting Coinbase was “simply commenting that the current draft of the bill was unworkable for the crypto industry”.
The CEO added that it is important the crypto industry gets “the right bill” since its current version had “too many giveaways to the traditional financial system or some of their trade groups” and noted that he is “pretty optimistic” all parties will come to a unanimous decision sometime soon.
Stablecoin yield battle intensifies
While Coinbase’s latest public stance signals optimism, the core dispute slowing down negotiations lies in how lawmakers treat stablecoin yield, and whether payment stablecoins should be permitted to generate rewards through decentralized finance activity.
On Monday, the Digital Chamber released a set of “Stablecoin Reward Principles,” outlining a framework designed to bridge the gap between innovation and banking stability. The group argued that retaining a specific exemption in the Senate’s draft legislation is crucial in allowing stablecoins to generate yield within decentralized finance (DeFi) protocols and as liquidity provider pairs.
“Eliminating these provisions would severely undermine dollar dominance in the digital asset ecosystem, effectively ceding this area to foreign jurisdictions and risks foreign currencies replacing US dollar denominated stablecoins in these essential portions of the digital asset ecosystem.”
During last week’s second stablecoin yield meeting, banking advocates circulated their own “Yield and Interest Prohibition Principles,” calling for a ban on stablecoin rewards.
Banking groups have long argued that allowing stablecoins to generate yield risks blurring the line between payment instruments and deposit-like products, potentially creating unregulated competitors to insured bank deposits.
Carol Goforth, Distinguished Professor of Law at the University of Arkansas, framed the dispute as a battle between two powerful financial sectors.
“The problem is that you have two powerful (and wealthy) industries fighting over which set of rules will most benefit themselves. Banks don’t want the competition for deposits with an alternative that would pay higher ‘interest’.”
Goforth pointed to the collapse of algorithmic stablecoin Terra in 2022 as an example banks frequently cite when warning against yield-bearing digital assets. However, she argued that fully reserved payment stablecoins backed one-for-one with liquid assets present a different risk profile.
Others in the industry framed the issue less as investor protection and more as competition.
Jamie Green, COO at Superset, described the prohibition proposal as “a legacy system trying to restrict competition,” arguing that removing yield incentives would undermine one of the most compelling use cases for dollar-denominated digital assets – programmable liquidity.
“That directly undermines dollar liquidity on-chain, which is ironic given that stablecoins are arguably the strongest vehicle for extending dollar dominance globally.”
Former SEC Senior Counsel and the chief legal officer at tx, Ashley Ebersole, suggested the debate hinges on how regulators define money in a digital context.
“A prohibition could reduce incentives for participation and shrink on-chain liquidity … On the other side, an unbounded yield environment risks blurring the line between payments and securities.”
The challenge, Ebersole added, is crafting a limited-yield framework that preserves innovation while maintaining consumer guardrails.
The legislative clock is now the biggest risk
Washington policy analysts say the debate over yield is now less about principle and more about political timing.
In a recent note, analysts at TD Cowen argued that while both sides remain publicly entrenched, lawmakers are increasingly focused on securing enough bipartisan support to move the CLARITY Act forward before the election cycle crowds out floor time.
The investment bank suggested that the biggest obstacle may not be the technical yield language itself, but the broader political standoff surrounding appointments to the SEC and CFTC, as well as Democratic demands for conflict-of-interest restrictions affecting senior government officials.
Twinstake’s head of legal, Jennifer Ouarrag, noted that the conflict-of-interest discussion is especially relevant as it affects both confirmation dynamics and confidence in how future oversight will be exercised.
“In my view, political coordination is at least as significant as the technical yield debate. Yield is prominent because it implicates banking interests and consumer framing, but the more fundamental question is regulatory architecture, which agency supervises which assets, under what statutory mandate, and with what safeguards.”
Eberson suggested that unresolved leadership questions at the SEC and CFTC weigh more heavily than the technical debates themselves.
“It’s more solvable to run through technical questions like structuring yield limits than it is negotiating Capitol Hill. If leading regulators are uncertain, there is a lot more hesitancy to pass a framework that has unclear enforcement implications.”
Offshore risk looms
Beyond Washington’s internal politics, several executives warned that prolonged uncertainty or overly restrictive provisions could gradually push activity outside US borders.
Stable CEO Brian Mehler described the offshore risk as “very realistic and highly concerning,” noting that dollar-pegged stablecoins already facilitate over $150 billion in circulation globally.
“Overly restrictive rules on rewards or DeFi use could drive issuers, developers, and capital to destinations more attractive to the booming DeFi industry. The result: weaker US oversight of dollar-based activity, reduced innovation at home, and diminished dollar dominance in digital finance.”
Superset’s Green pointed to jurisdictions such as the United Arab Emirates and Singapore, as well as the European Union’s Markets in Crypto-Assets (MiCA) regulation, as examples of clearer regulatory pathways that are already attracting projects.
Other experts noted that the industry’s concern should be less about whether dollar stablecoins survive and more about where the infrastructure supporting them is anchored.
“The greater risk is structural: the innovation layer, governance participation, and validator infrastructure supporting dollar-based DeFi markets could increasingly concentrate outside the US perimeter. Over time, that can reduce domestic influence over standards-setting, supervisory visibility, and institutional participation pathways.”
Despite the tension, Coinbase executives remain publicly confident that compromise is possible. For now, negotiators continue to refine draft language behind closed doors. Whether the CLARITY Act ultimately succeeds may depend less on the technical structure of stablecoin rewards and more on whether Washington can resolve its own institutional gridlock before the legislative clock runs out.
