Clarity Act Update: Why Are Banks Fighting Against Stablecoin Yield?

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A year ago, US banks thought they had won.

The GENIUS Act, signed in July 2025, banned stablecoin issuers from paying yield on their tokens. Banks had lobbied hard for that provision. With it in place, they believed the competitive threat from digital dollars was addressed.

The law said nothing about exchanges.

How the Gap Became a Crisis

As CoinGecko outlined today, within months of GENIUS passing, Coinbase was offering roughly 4% on USDC and Kraken around 5%. Chase was paying 0.01%. The Blockchain Association, representing 125 companies including Coinbase, Kraken and a16z, later wrote to the Senate arguing Congress had “intentionally preserved” the ability of platforms to offer rewards.

Banks called it a loophole. The crypto industry called it a negotiated outcome.

The Federal Reserve missed it entirely. Fed Governor Stephen Miran gave a speech in November, months after GENIUS passed, stating he saw “little prospect of funds broadly leaving the domestic banking system” because stablecoins don’t offer yield. The yield programs were already live.

Bank of America’s CEO eventually put a number on what was at stake: $6 trillion in deposits could leave US banks for stablecoins. The Fed’s own modeling found that in a high adoption scenario, reduced lending capacity could reach $1.26 trillion.

Over 3,200 bankers signed letters to Congress. The American Bankers Association made closing the gap their top legislative priority.

The Compromise That Came Undone

Congress responded with the CLARITY Act, extending the yield prohibition to all digital asset service providers. In January, Coinbase withdrew support and the Senate vote was postponed. The White House stepped in, brokering talks with a March 1 deadline. That passed with no deal.

On March 20, Senators Tillis and Alsobrooks announced a compromise – passive yield banned, activity-based rewards permitted. The market priced in a banking industry win immediately.

Also Read: Tokenization Hearing Confirmed, CLARITY Act Stablecoin Deal Done “In Principle”: Big Week for Crypto

This week, Coinbase rejected the draft again, telling Senate offices it cannot support language that bans yield “directly or indirectly” and anything “economically equivalent to bank interest.”

The Government Is Pulling in Two Directions

The difficulty, as CoinGecko notes, is that the US government is not aligned on the outcome. While banks push for restrictions, Treasury Secretary Bessent expects stablecoins to generate $2 trillion in demand for US government bonds. Tether alone already holds over $130 billion in Treasuries – more than Germany.

Banks need the loophole closed. Treasury needs stablecoins to grow. Senator Lummis has said negotiators are targeting committee action by end of April.

It’s now a wait-and-watch game.