Crypto Legislation Stalls As White House, Banks Clash

"The stalled legislation, known as the CLARITY Act, follows last year's GENIUS Act, which created the first federal framework for stablecoin issuers. Supporters of the CLARITY Act argue it is needed to provide clarity for cryptocurrency firms, which have been operating in a regulatory gray area that executives say has stymied growth and innovation."

"The core dispute involves whether crypto exchanges should be allowed to offer yield-bearing rewards on stablecoins, digital tokens designed to maintain a $1 value. Banks warn that allowing such yields could siphon deposits from traditional bank accounts, threatening lending operations that are central to the economy."

"Crypto firms, including Coinbase, counter that restrictions on rewards programs would be anticompetitive and stifle innovation. Stablecoins, they argue, must be able to offer incentives to attract customers. Analysts estimate that by 2028, stablecoins could divert up to $500 billion in deposits away from U.S. banks."

Negotiations over landmark U.S. cryptocurrency legislation have stalled after major banks rejected a White House compromise, threatening passage of the CLARITY Act this year. President Trump criticized financial institutions for undermining the crypto agenda. The bill aims to provide regulatory clarity for cryptocurrency firms operating in a gray area. The central dispute involves whether crypto exchanges should offer yield-bearing rewards on stablecoins. Banks oppose such yields, fearing they would divert deposits from traditional accounts and threaten lending operations. Crypto firms argue restrictions would be anticompetitive and stifle innovation. Analysts project stablecoins could redirect up to $500 billion from U.S. banks by 2028.

Read at Bitcoin Magazine